Main Areas of Trade and Economic Cooperation

Indonesia represents Russia’s traditional trade partner in Southeast Asia. The last decade has been marked by the accelerated development of economic relations between the Russian Federation and the Republic of Indonesia and considerable increase in the volume of bilateral trade that eventually surpassed USD2 bn. mark in 2011. Another increase in Russian-Indonesia turnover is however mainly driven by significant growth of Indonesian export to Russia - $1,530.7 mil in 2011 against $1,045.6 mil in 2010. Whereas at the same time Russian export dropped from $866 mil to 635.9 mil. Obviously, both low percentage of Russian-Indonesian turnover in Global Russian trade (less than .5%) and imbalance in mutual trade are attributed to underutilized potentials of both trade partners.
 
Further uprising trend in the development of Russian-Indonesian trade in the foreseeable future may be defined by the implementation of a range of Russian business investment projects in Indonesia and spurred by the intensification of economic, scientific, military and technical, information and cultural cooperation.

Furthermore the expansion of Russian-Indonesian trade and economic cooperation rests upon the fundamental unity of interests and similarities in basic approaches towards settlement of global financial, economic and political issues, yet well recognized interdependency and strong mutual complementary nature of economic potentials of both countries.

A serious constraint in the development of Russian-Indonesian ties, however, still remains a regrettably low level of information exchange about enormous untapped potential of cooperation in the sector of trade, investment, tourism and other areas of reciprocity for the business circles of both countries.

Some of the most perspective areas for bilateral trade and investment cooperation are as follows:
  • Power Sector
  • Mining Industry, Oil & Gas Sector, Metallurgy
  • Aerospace, Earth Remote Sensing, Telecommunications, Global Ocean Exploration
  • Mechanical Engineering
  • Shipbuilding
  • Timber and Woodworking Industry
  • Cooperation in Banking and Financial Sector
  • Environmental Protection
  • Tourism, etc.
MOU on bilateral cooperation in investment, trade and economic issues was signed in November 2010 between the Russian Federation Ministry of Economic Development and the Indonesian Ministry of Trade, a solid foundation for the development of two-way dialog.

A powerful instrument of G2G cooperation is the Intergovernmental Russian-Indonesian Joint Commission on Trade-Economic and Technical Cooperation. The latest, 8th Session of the Commission held in Moscow on the 25th of June, 2012 was co-chaired by Dmitry Rogozin, Russian Deputy Prime Minister and Hatta Rajasa, Coordinating Minister for Economic Affairs of Indonesia.

In the course of the Session the Parties undertook arrangements on different aspects of mutual collaboration and joint efforts aimed at all-round expansion of business relations, yet confirmed their commitments towards development of diversified and more balanced trade, building of investment climate conducive to business activities of both Parties. Particularly the participants acknowledged their willingness to use thier utmost endeavors for the significant increase in mutual trade turnover, expected to reach USD5bn by the year of 2015.

The Business Council for Cooperation with Indonesia established in November 2009 is another essential element of bilateral cooperation.

Presently the following large-scale projects of Russian-Indonesian cooperation underway are worthwhile to be noted:
  • Cooperation (since 2008) between Airspace Corporation Air Launch and PT Air Launch Centra Nusa for the development of aerospace complex (spaceport) on Biak island (West Papua province) and relevant world class infrastructure for the provision of commercial satellite launch services utilizing Antonov An-124-100VS ‘Ruslan’ aircraft to carry a ‘Polyot’ two-stage booster rocket. The system would provide for the most efficient and economically viable payload delivery to equatorial and near-equatorial orbits.
  • The thermal power generating project based on MOU between Russian OJSC ‘Power Machines’ and Indonesian state company PT Perusahaan Listrik Negara (PT PLN) (signed in August 2009) on the supplies of Russian-made power equipment for the Indonesian power sector. The ‘Power Machines’ was cleared by the Indonesian government to built two 660 MW turbines for the Indramayu power station in West Java. Yet another opportunity for ‘Power Machines’ in conjunction with Russian ‘EMAlliance’ and Indonesian PT Wijaya Karya to handle the deliveries for the 660 MW unit of Cilacap power plant (Central Java) has also been considered. Russian involvement in the second phase of Indonesia’s national 10,000 MW fast-track power program would definitely be conducive to expansion of Russian-Indonesian coop in the power sector.
  • A memorandum on cooperation in joint exploration and development of oil and gas fields was signed in April 2007 between Russian LUKOil Overseas and Indonesian state-run oil & gas company PT Pertamina. Later the same year, in September, the companies proceeded further to enter into an agreement on joint study of several prospective blocks in Indonesia. At the initial stage the Russian and Indonesian partners shall explore opportunities for tapping deepwater shelf in West Papua Province starting with joint application for rights to explore offshore of Semai block. The parties also agreed to set up a steering committee and a joint technical group to study several prospective offshore and onshore areas in various regions of Indonesia. The purpose of the study is to evaluate and interpret data for further exploration and development of oil and gas blocks. The ongoing arrangements lay a foundation for a strategic alliance between the two oil companies towards implementation of joint projects in the area of oil and gas exploration and production in different parts of the globe.
  • Russian innovation company Petros Group opened its representative office in Jakarta in early 2010. The group has been heavily promoting for the Indonesian market implementation of revolutionary EOR (enhanced oil recovery) methods, offering oil tanks cleaning services based on a new technology of the accelerated removal of solid oily sludge as well as the new efficient distant earth screening technology of prospecting and exploration of minerals deposits.
  • The agreement between Russian Sintezneftegaz (Sintez Group) and Indonesian PT Archipelago Resources signed in 2007 stipulates for the provision of services to the Indonesian party in the area of oil exploration and refinery. Another Sintez Group subsidiary, Sintezmorneftegaz yet in 2008 concluded a production sharing contract with BPMIGAS (Indonesian upstream oil and gas executive agency). This Russian company has been awarded the tender for geological survey and extraction of oil in East Bawean-I block (East Java).
  • The unitary enterprise Goznak (sole Russian banknotes and coins manufacturer) has been successfully participating (since 2001) in regular international bids held by Bank Indonesia for the supply of banknote paper. To date Goznak holds the rank of the premier supplier of banknote paper for printing of the Indonesian currency.
  • The specialists of JSC ‘Information Satellite Systems ‘Reshetnev Company’ (ISS-Reshetnev) have completed the development of  TELKOM-3 Satellite Ground Control System under the contract with PT Telekomunikasi Indonesia Tbk (Telkom) signed in March 2009 for the turnkey suply of geostationary communication satellite system. The contract stipulated the development, manufacturing and orbiting (employing the Russian Proton-M booster rocket) of a telecommunication spacecraft with active service life of up to 15 years, as well as the provision for a ground control segment, in-orbit support and training services for the customer’s personnel.

    The fully functional TELKOM-3 Ground Control Segment has been successfully tested in late May 2012, when communication was established between the Indonesian Mission Control Center and the TELKOM-3 satellite mounted on the manufacturer's test bench.
    However after the launch of TELKOM-3 on August 6 the Briz-M booster due to a glitch in its fuel system eventually failed to bring the satellite to the designated geo-stationary orbit.

    The Russian side has proposed a replacement satellite to be manufactured and launched within a short time span, whereas the response from the Indonesian partners may be expected after the settlement of insurance reimbursement.
  • Kaspersky Lab has been active on the Southeast market of antivirus software for more than a decade having a regional office in Petaling Jaya (Malaysia) since 2008. Presently software by Kaspersky Lab is the most popular and sought after antivirus security product on Indonesian market attracting over 1 million users in the country. This number is expected to double within the next couple of years.
Among other prospective and priority avenues of Russian-Indonesian economic cooperation that are obviously worthy of special consideration by the parties are the following areas of joint activity:
  • Industrial sector: facilitating cooperation in the field of mechanical engineering, supplies and joint manufacturing of heavy construction and mining machinery (tractors, dozers, excavators, cranes and lifting equipment).
  • Peaceful use of atomic energy: Indonesia, technically, is prepped for development of national atomic power sector and disposes of sufficient Uranium resources (as much as 59 thousand tons in West Kalimantan and large untapped resources in the province of Papua). Currently, there are three research reactors operating in Indonesia and built in different periods - Bandung Triga 2000 (2000 kW), Kartini Research Reactor (100 kW) and Siwabessy Multipurpose Reactor (30MW).
  • Mineral resources mining and processing: Much anticipated resumption of the high profile investment project earlier undertaken by UC Rusal in cooperation with state-run mining company PT Antam. The project foresaw combining efforts in establishment of a JV to be engaged in exploration of bauxite resources and development of alumina production in W. Kalimantan, boosting aluminum production and power sector in North Sumatra (the respective agreement expired in September 2010). Another potential area of prospective Russian-Indonesian cooperation may be joint exploration and mining of substantial nickel-rich deposits on the island of Sulawesi as well as development of nickel ore processing facility in Indonesia.
  • Transportation and infrastructure development: Cooperation in development of logistic and transportation infrastructure, inter alia aimed at facilitating bilateral supplies of finished goods and raw materials (e.g. joint development of harbor infrastructure for discharge, storage and transportation of palm, kernel and coconut oil in Russian ports; application of Indonesian expertise in toll road construction; involvement of Russian investors in construction of coal terminals in Kalimantan), shipments to Indonesia of railway wheel pairs.
  • Agriculture and agro-industrial sector: Expansion of shipments to Indonesia of Russian fertilizers, grain and flour, as well as agricultural machinery yet diversification of foodstuff and commodities import from Indonesia.
  • Banking and financial sector: Enhancing cooperation (including that of Vnesheconombank, Roseximbank, Alfa-bank with Bank Mandiri and BNI) in different areas — funding of bilateral projects; creating conditions that enable settlements in bilateral trade to be effected in national currencies, developing electronic micropayments system.
  • Anticipation and mitigation of consequences of emergency situations: Cooperation between Russian EMERCOM and Indonesian National Board For Disaster Management (BNPB) in different areas such as environmental monitoring and firefighting (organization of supplies to Indonesia of special equipment and aircraft, e.g. Beriev BE-200 “Altair” multipurpose amphibious aircraft manufactured by Irkut corporation), earthquakes, tsunami and other natural disaster recovery, fighting terrorism, etc.
  • Travel Sector: Resumption of Aeroflot regular flights to Indonesia, opening of direct flights of an Indonesian airline company to Moscow, Russian investments into the construction of hotels and other objects of tourism industry in Bali.