12.03.2018 (The Malaysian Reserve) - MALAYSIA and Indonesia have enjoyed 60 years of diplomatic relations, but economic activities between both countries have been limited to commodity and low-value goods.
Both countries — two of the world’s largest producers of palm oil, or about 90% of the world’s productions — need to seek new growth areas, said former Coordinating Minister for Economic Affairs of Indonesia Prof Emeritus Dorodjatun Kuntjoro-Jakti (picture).
He said Malaysia and Indonesia need to shift their focus to new growth areas such as manufacturing, energy and shipping — especially with the volatility of the global commodity market.
Dorodjatun, who has worked under all seven Indonesian presidents, said the Strait of Melaka itself has a massive potential that can be tapped into.
The shipping route which separates the two countries, is one of the world’s busiest and with nearly 100,000 vessels sail through the strait annually.
“I am disturbed by this. We have this huge traffic that passes by every day, but historically, our relationship is not at a level we would expect based on this fact,” he said in his presentation at the Institute of Strategic and International Studies Malaysia International Affairs Forum in Kuala Lumpur (KL) last Friday.
The Strait of Melaka, which connects the Pacific and Indian Oceans, accounts for nearly a quarter of the world’s traded goods.
Data from the US Energy Information Administration showed that 26.3%, or 15.5 million barrels per day (bpd), of total world petroleum and other liquids supply flowed through the sea route in 2015.
In 2016, that figure rose to 16 million bpd.
Dorodjatun proposed the possibility of KL and Jakarta to work together and develop one of the largest terminals of liquefied natural gas along the oil trade chokepoint.
“We can develop it and make use of this traffic in the future. Maintenance services for vessels can also be offered. Right now, the only thing that connects Indonesia with Malaysia is palm oil. Are we just going to stop there?” he said.
Apart from shipping, Dorodjatun said greater cooperation can be realised in the manufacturing sector, particularly in the automotive and aircraft production.
“More automotive companies are prepared to try and understand how to tropicalise cars because of the high humidity in this part of the world.
“This is a problem that is not understood even by Asians — that you have to remodel the cars,” he said.
In February 2015, national automaker Proton Holdings Bhd signed a memorandum of understanding with Indonesia’s PT Adiputra Citra Lestari to develop and manufacture an “Asean Car”. However, the project hit a snag after Proton decided to undergo a restructuring exercise.
“In Indonesia, there are also efforts to produce airplanes for short-haul flights. These are some areas that we can explore,” he said.
Indonesia is currently Malaysia’s sixth-largest trading partner. Total bilateral trade between the two countries stood at US$16.9 billion (RM66.2 billion) in 2017 and is expected to hit US$30 billion by 2020.
Malaysia External Trade Development Corp trade commissioner in Indonesia Naim Abdul Rahman said to double the trade volume, both countries will focus on several key sectors including infrastructure development, transport equipment, the halal industry, information technology services, multimedia and franchise businesses.