Simon Roughneen in Jakarta, James Rothwell in London — British engineers could be handed lucrative contracts with Indonesia to regenerate its ailing road and rail networks under a government push to boost trade and diplomatic ties with Southeast Asia after Brexit, the Telegraph has learned.
The move would pit British firms against Chinese and Japanese giants who are vying for influence over Indonesia’s growing economy, in one of the first tests of the UK’s post-Brexit “Global Britain” strategy.
“We are trying to get a greater slice of the action,” Moazzam Malik, the British ambassador in Indonesia, told the Telegraph as UK officials unveiled the new plan to woo Indonesian investors.
The Department for International Trade hopes the successful regeneration of St Pancras International and the Jubilee tube line, which are said to have dazzled Indonesian ministers during a recent visit to London, will give the UK an advantage in securing investment.
At the heart of the operation in Jakarta will be Richard Michael, a trade negotiator with 30 years experience who was this week appointed as the UK’s Export Finance (UKEF) head, the first to be based in Indonesia.
He will be charged with smoothing over deals between British exporters and Indonesian government departments by offering “attractive financing options,” such as loans in local currencies.
“The UK is recognised as a global leader in a range of sectors that support Indonesia’s development ambitions, and there are significant opportunities for British business to benefit from UK-Indonesia trade,” Mr Michael told the Telegraph.
“I will work closely with UK suppliers and buyers in the Indonesian public and private sector to ensure that they can benefit from this increased support from UK Export Finance, as well as the Department for International Trade, to ensure that no viable UK export fails for lack of finance and insurance.”
He added that last year UKEF increased funding for projects in Indonesia from £1.75 billion to £3.5 billion.
If the project is a success it could help lay the groundwork for a future UK-Indonesia free trade agreement, one of the key prizes being pursued by Liam Fox, the international trade secretary, alongside deals with China, the US and India. Mr Fox visited Jakarta in March last year.
It comes as the Indonesian government launches a major infrastructure overhaul, building new railways, roads and ports, with many of the larger projects backed by major Chinese and Japanese companies.
China, for example, won a contract in 2015 to build a high-speed rail line connecting Jakarta and the city of Bandung, though that project has been slow to get moving due to land acquisition disputes along the proposed route.
British companies are more likely to push for contracts on the long-awaited tube and overground rail network for the country’s traffic-clogged capital.
“Indonesia is more self confident than it’s ever been before, it’s reaching out much more strongly abroad and the relationship is stronger than it’s ever been,” Richard Graham, the prime minister’s trade envoy to Indonesia, Malaysia and the Philippines, said.
Indonesian ministers were watching the UK with “great interest,” he added, having inspected London regeneration projects such as St Pancras International, Crossrail and the Jubilee line.
Boosting investment would also benefit diplomatic relations, which have thawed since David Cameron visited Jakarta in 2015 for a meeting with Joko Widodo, the president of Indonesia.
Mr Widodo has pledged to open up Indonesia’s economy, which has a long record of protectionism compared with neighbours such as Malaysia, Singapore and Thailand.
With current growth around 5 per cent per year, consultancy firm PwC predicts that Indonesia will be the world’s 4th biggest economy by 2050, behind only China, India and the U.S.
Since the Brexit vote there has been a surge in bilateral meetings – according to Mr Graham seven Indonesian cabinet ministers visited London earlier this month to talk trade – and several more will visit in March to discuss investment opportunities in Indonesia.
“We’ve got a huge amount to offer,” Mr Graham said , “there has been a huge increase in the middle class and a demand for consumer products…in five years time I would hope we’ve reached an agreement where we can do more through a free trade structure.”
However, trade experts warned that Indonesia remains fiercely protectionist and predicted that the country’s decentralised government and issues with corruption could alienate British investors.
The former speaker of parliament is facing trial over his alleged involvement in tens of millions of pounds worth of bribes linked to a state electronic ID card scheme.
With parliamentary and presidential elections due next year, political considerations will weigh on any investment decisions taken by the Indonesian government.
“Protectionism is rising in Indonesia, especially nearing the election year. President Joko Widodo is expectedly looking more inward and focusing on domestic economy,” said Arianto Patunru, an Indonesian economist at the Australian National University.
But the president will need to show progress on infrastructure developments, not least in Jakarta where rush hour traffic jams sometimes mean 2-3 hour commutes to and from work.
“Jakarta would take it [British investment] for sure since Jokowi really wants to build more,” said Yohanes Sulaiman, a politics lecturer at Universitas Jenderal Achmad Yani in Bandung.
But other countries in the region are regarded as easier places to do business, though they are much smaller markets than Indonesia’s 260 million population.
“In Southeast Asia, Malaysia and Vietnam are much better bets than Indonesia…but it would be a long haul,” said Prof Damian Chalmers, a law and trade specialist a the London School of Economics.
EU trade talks with Indonesia have floundered, while negotiations over Indonesia’s proposed FTA with neighbour Australia are behind schedule.
“I don’t think any FTA can go as planned in terms of timeline these days,” said Mr Patunru.
“We need to see an acceleration of the frequency and progress in the substance of the negotiations if we want to achieve this ambitious target,” said the EU ambassador to Indonesia, Vincent Guerend, in a speech earlier this month.Show