Trade relations between Malaysia and Turkey have been very positive since decades.
Strategically, we observed that the bilateral trade relations between the two countries are more towards a complimentary trade than a competitive trade.
First of all, how would you evaluate your economy for people who wish to get acquainted with the economy of Indonesia?
- Indonesia is the largest country in Southeast Asia with a total of 17,508 islands and a territory spanning 1,904,569 km². As of 2024, Indonesia’s population is 281,562,465, with the majority adhering to Islam (approximately 84.35%). This makes Indonesia the fourth most populous country globally and the second-largest Muslim-majority country, with around 236 million Muslims in 2023.
- Indonesia’s economy grew by 4.95% year-on-year in Q3-2024 compared to Q3-2023 (BPS). In 2023, Indonesia’s economy grew by 5.05%, ranking it eighth in the world for Real GDP Purchasing Power Parity, a measure that compares productivity and living standards across countries (CIA, World Factbook).
- According to World Bank data, Indonesia’s manufacturing sector contributed an added value of USD 255 billion throughout 2023, employing about 21% of Indonesia’s total workforce, making Indonesia the 12th-largest manufacturing country in the world.
- Between January and September 2024, Indonesia’s trade balance recorded a surplus of USD 21.95 billion, with total exports at USD 192.82 billion and imports at USD 170.86 billion.
- Indonesia has demonstrated significant and steady growth over the years, maintaining a GDP growth rate of around 4-5%. This growth has been driven by various sectors such as manufacturing, agriculture, trade, and services. According to World Bank data, Indonesia’s manufacturing sector contributed an added value of USD 255 billion throughout 2023 and employing about 21% of Indonesia’s total workforce, thus making Indonesia the 12th-largest manufacturing country in the world. Indonesia’s strategic location, young population, and expanding middle class also make it a focal point for regional and global economic activities.
- Indonesia also has been making significant strides in developing its sharia economic sector. In the 2023/2024 State of the Global Islamic Economy (SGIE) report, Indonesia ranks 3rd in the Global Islamic Economic Indicator Score. This is a notable improvement, as Indonesia moved up one spot from the previous year. As the largest Muslim-majority country, it recognizes the importance of this sector and its potential to drive economic growth, inclusivity, and trade between Islamic countries and the world
The Organization of Islamic Cooperation Halal Expo and the 10th World Halal Summit will be held in Istanbul between November 27-30, 2024. Countries and companies from all over the world will participate in the event. How do you evaluate these developments?
- “First, I would like to extend our support and congratulations to the organizers of the Organization of Islamic Cooperation (OIC) Halal Expo and the 10th World Halal Summit.
- Indonesia, as the largest Muslim-majority country, recognizes the importance of this sector and its potential to drive economic growth, inclusivity, and trade between Islamic countries and the world.
- We are proud to have participated in this event in 2023, which provided valuable insights and opportunities for collaboration across industries. This year’s event in Istanbul serves as a platform for nations and companies to not only showcase their products but also to exchange knowledge, foster partnerships, and further develop the standards and innovations within the halal industry.”
- The upcoming Organization of Islamic Cooperation (OIC) Halal Expo and the 10th World Halal Summit in Istanbul shall have a positive impact on the halal industry development. This event will serve as a major platform for showcasing halal products and services. In addition, with countries and companies from all over the world participating, it highlights the growing importance and demand for halal-certified goods, facilitates new business partnerships, as well as lead to valuable connections and collaborations within the halal industry which will ultimately boost economic growth.
Turkey has embarked on a huge development mobilization. How would Indonesia like to participate in these projects jointly undertaken by government and private firms?
- Indonesia appreciates Turkey’s commitment to industrial transformation towards a greener economy and digitalization. Turkey’s initiatives to become a high-value-added, technology-intensive export-focused production hub are commendable, leveraging both natural and human resources to the fullest. The Ministry of Industry of The Republic Indonesia welcomes Turkey’s offer to collaborate on the industrial development of both countries.
Indonesia is one of the most liberal countries in Asia. The business climate seems to be quite favorable for foreign investors. What would you like to say about the investment potential Indonesia offers to foreign investors?
- From January to September 2024, Indonesia’s investment realization reached IDR 1,261.43 trillion, with Foreign Direct Investment (FDI) amounting to IDR 654.40 trillion or 51.88% of total investment. In 2023, one of the contributors to Indonesia’s 5.05% economic growth was the non-oil and gas processing industry, which grew by 0.87% over the same period. (BKPM)
- Key downstream sectors include mineral processing (smelters), forestry (pulp and paper), agriculture (CPO/oleochemicals), oil and gas (petrochemicals), and electric vehicle battery ecosystems, with investment reaching IDR 272.91 trillion during the January-September 2024 period.
- The Ministry of Industry of The Republic Indonesia has an Industrial Human Resource Development Agency/BPSDMI focused on developing industrial competency infrastructure to improve Indonesia’s workforce quality and meet specific industrial demands.
- As of January-September 2024, employment generated from investment reached 1,875,214 people (Indonesia Investment Coordinating Board).
- Indonesia provides fiscal and non-fiscal incentives for foreign investors, including Tax Holidays, Tax Allowances, Investment Allowances, Super Deduction Tax for Vocational Training, and Super Deduction Tax for R&D. Additionally, non-fiscal incentives include guarantees of fair treatment for foreign investors, ensuring no discrimination between foreign and local companies.
What kind of messages would you like to convey to Turkish investors wishing to invest in Indonesia?
What are the key sectors for investments in Indonesia, especially for Turkish investors?
- The chemical and pharmaceutical industries ranked fourth among the top five subsectors with the highest FDI realization from January to September 2024, contributing USD 3.22 billion. The food industry also ranked fourth among the top five subsectors with the highest domestic investment realization during the same period, contributing IDR 50.46 trillion. (BKPM)
- From these industrial subsectors, it can be concluded that the chemical and pharmaceutical industries which can be extend to cosmetics industry as well as the food industries, are crucial to Indonesia’s economic growth. Cooperation with Turkey in these subsectors could enhance technological and innovative exchanges in each sector.
- Indonesia has four Halal Industrial Zones, including Modern Halal Cikande in Banten, Safe and Lock in Sidoarjo, East Java, Bintan Inti Halal Hub in Riau Islands, and Jababeka Industrial Estate in Bekasi, West Java. We are planning eight additional Halal Industrial Zones in various regions such as Jawa Island, Borneo Island, Riau Island, Sumatra Island, and Jakarta, presenting investment opportunities for Turkish investors to develop themed zones focused on specific industrial needs.
- Indonesia offers investment opportunities for the development of industrial zones, including Halal Industrial Zones, as themed areas that meet the specific needs and development of certain industries. Turkish investors may consider investing in these designated zones.
In which sectors do you see the most potential for commercial integration between Indonesia and Turkey? How do you think the trade volume between the two friendly nations could be increased to a better level?
- Indonesia’s export trade to Turkey reached USD 1.45 billion from January to September 2024, growing by 23.55% compared to the same period in 2023 which valued at USD 1.17 billion. Conversely, Indonesia’s import trade with Turkey amounted to USD 310.3 million from January to September 2024, down by 34.19% compared to the same period in 2023 which valued at USD 471.5 million. Indonesia thus saw a 62.20% increase in its trade surplus, reaching USD 1.14 billion from January to September 2024 compared to USD 704.4 million in the same period in 2023.
- Indonesia’s exports to Turkey are primarily dominated by processing industry, valued at USD 1.44 billion between January to September 2024 (BKPM). Key export products include basic metals, coal-based products, oil refining products, and food industry products (Pusdatin).
- With the increasing trade balance between the two nations, there is significant potential for further development. As countries with predominantly Muslim populations, Indonesia and Turkey can explore partnerships in industries such as food processing, cosmetics, pharmaceuticals, modest fashion, and others. This collaboration offers mutual benefits by opening access to new markets: Indonesia gains access to halal markets in Europe and the Middle East, while Turkey can access Indonesia’s markets, enhancing export and import values in industries with substantial potential for both countries. Through strategic partnerships, Indonesia and Turkey can establish a more integrated and competitive global supply chain, supporting economic growth and fulfilling the ever-growing demands of international markets.
Mr. Agus Gumiwang Kartasasmita
Minister of Industry of The Republic Indonesia
