A Brief History of the Economic Relations between Indonesia and Japan

Japan is the largest foreign investor in Indonesia at the end of June 1960 with a value of US $3.9 billion invested in 202 projects. Secretary-General of the Industry Ministry, Agus Sujono said Japanese investment projects that have been completed at that time amounted to US $ 1.5 billion.^[1] In April 1971, the Ministry of Agriculture of Indonesia grants permission to companies from Japan and East Malaysia to conduct joint forestry in Borneo.^[2] By 1972, the Japanese government has provided investment financial assistance amounting to 5.4 million yen to private entrepreneurs in Indonesia.^[3] In May 1972, President Suharto left for Tokyo in hopes of strengthening relations between Indonesia and Japan that was taking Indonesia towards political and economic stability.^[4]

In September 1972, President Suharto told Japanese Trade Minister, Yasuhiro Nakasone that Japan cooperates in Asahan Aluminium and hydro-electric power projects amounting to US$ 400 million in North Sumatra.^[5] In May 1975, Japan topped the list of foreign investors in Indonesia with total capital of US$ 1 billion, according to the Investment Coordinating Board.^[6] In February 1977, Japan has topped the list of foreign investors in Indonesia with investments in 208 projects. This was followed by the United States, Hong Kong, the Netherlands and Singapore.^[7] In March 1977, the Ambassador of Indonesia to Tokyo, Lieutenant General A.W. Wltono said no signs of slowing Japanese investment in Indonesia although the government has tightened its investment policy recently.^[8] In March 1979, the Chairman of the Indonesian Chamber of Commerce and Industry, Suwoto Sukendar said Japanese investment in Indonesia should have shifted the emphasis to the financing of export industries and not production for the local market.^[9]

In June 1979, Japan approved the "cluster concept" developed by Indonesia and is being upgraded to be recognized by the world. Approval was believed to have been developed by Japanese Prime Minister Masayoshi Ohira to President Suharto in the first round of their talks in Tokyo.^[10] In the same period, Japan and Indonesia are expected to sign a formal agreement worth US$ 160 million for Japanese investments in petroleum development projects in Indonesia.^[11] In September 1979, a Japanese company for capital investment in Japan-Indonesia joint project to develop oil resources in the islands of Java, Borneo and Sumatra, was inaugurated. The new firm, named Indonesia Nippon Oil Corporation has an initial capital of US$ 8,000 million.^[12] In November 1979, Indonesia Nippon Oil Corporation Co Ltd (Inoco) said it would hold talks with the Indonesian government about the financing of new projects in oil development in the country to get more oil supplies.^[13]

In January 1980, President Suharto receives an economic mission from Japan to discuss trade and economic relations between Indonesia and Japan. This discussion focused on Japanese investment in Indonesia in which Indonesia trade parties consider Japanese companies did not provide an opportunity for Indonesia colleagues as a sales representative.^[14] In October 1980, Indonesia began diversifying its sources of foreign investment to prevent the industry from dependence on technology from any single nation like Japan. This diversity is closely linked with the aim of strengthening the resilience of the country from heavily reliant on any technology from other single country.^[15]

In November 1980, Japan topped the list of foreign investors in Indonesia with a total investment of US$ 2.5 billion in 195 projects, according to the Board of Investment.^[16] By January 1982, the Japanese occupied the top six positions in the list of Indonesia foreign investors with a total investment of US$ 3,590.6 million in 203 projects, while Hong Kong holds second place. Since the Indonesian government announced a policy of foreign investment in 1967, total foreign investment reached US$ 9.682 million by 30 countries.^[17] In December 1982, foreign investment in Indonesia totaled US$ 11.344 billion since investment law came into force in 1967. Japan topped the list of foreign investors, accounting for 35.8 percent from total investments.^[18]

In August 1983, data compiled by the Investment Coordinating Board for the period 1967-1982 shows Japan are the largest investor in Indonesia in the last 15 years with a total investment of US$ 4.344 million in 208 projects.^[19] In September 1983, Japan has asked Indonesia to improve the climate for investment, while Indonesia said one of his main concerns is to increase non-oil exports to Japan, according to a joint statement issued by the two countries.^[20] Japan remains the largest investor in Indonesia since the foreign investment law came into force in 1967, followed by Hong Kong and the United States, according to the Investment Coordinating Board in 1985.^[21] In September 1985, the first mission of Indonesia investment to Japan has led to success through a day of meetings with Japanese businessmen and entered into a joint venture with a total of 10 Japanese companies.^[22]

In November 1985, the Minister of Industry of Indonesia, Hartarto stated that Indonesia will continue to depend on Japan, its largest trading partner to increase foreign trade and foreign investment in the country.^[23] In January 1986, the Director of Japan External Trade Organisation in Jakarta, Hiroshi Oshima predicted that bilateral trade and investment between Indonesia and its largest trading partner; Japan is expected to remain sluggish in the year.^[24] In March 1986, the First Secretary of the Japanese Embassy in Jakarta, Toyohiko Shimada said Japanese investment in Indonesia is experiencing downtrend in the last three years and is expected to decline further in the years to come.^[25] In August 1986, Japanese companies are reluctant to invest in Indonesia because the domestic market is not growing, high cost and lack of incentives.^[26]

In October 1986, the Indonesian Chamber of Commerce and Industry (Kadin) send a trade and investment delegation of 100 people led by its chairman, Sukamdani Gitosardjono to Japan.^[27] In January 1987, the Director of the Japan External Trade Organization, Hiroshi Oshima said Japanese investors who see Southeast Asia as a region for their surplus capital, are likely to stay away from Indonesia to give priority to Malaysia and Thailand although the government takes steps to attract investment in Jakarta.^[28]

In February 1987, the Indonesian government insists it will not sacrifice national interests in order to attract foreign investment needed to stimulate economic growth. The assertion was made in the wake of the Japanese report stating that Indonesia is now one less interesting nation in Asia for foreign investment.^[29] In May 1987, Indonesia has denied that Japanese foreign investment in the country has pulled out and gradually transferred to Thailand.^[30] In June 1987, Japan plans to import Indonesian ready timber products that are worth US$ 305 million next year.^[31] In October 1987, the Chairman of the Board of Investment of Indonesia, Gina Kartasasmita said that the Indonesian government would like to see Japan's big business interests in the country are balanced with investment from other countries, especially the United States.^[32]

In November 1987, President Suharto had called on Japanese businessmen that are visiting Indonesia to increase their investments and help provide jobs to ensure economic stability in Indonesia.^[33] By June 1988, Japan was seen quietly increased assistance to help Indonesia deal with the increase in its foreign debt, for directly binding the Southeast Asia's largest country to Tokyo.^[34] In May 1990, Japanese Prime Minister, Toshiki Kaifu arrived in Jakarta for the start of a three-day visit. He was the seventh Prime Minister of Japan visited Indonesia.^[35] In the same month, the Japanese conglomerate, Sumitomo has signed up as the first tenant of the Batam Industrial Park, a joint venture worth US$ 400 million by two Singapore companies that are supported by the government and Salim Group from Indonesia.^[36]

Japanese Ambassador in Jakarta, Michihiko Kunihiro on the other hand said Japan which is the largest source of aid and investment to Indonesia, will not link aid to Jakarta with records of human rights in the country. The principle of Japan is not involved in Indonesian politics.^[37] In July 1990, Japanese companies promised to bring in investments worth US$ 903 million within the first 6 months of that year, to strengthen Japan's position as a major source of foreign investment in Indonesia.^[38] In August 1990, the Bank of Tokyo Ltd has agreed with the government of Indonesia to cooperate in promoting investment by Japanese companies in Indonesia. Under the agreement, the Bank of Tokyo Ltd. and Indonesian governments will exchange information on Japanese investors and Indonesian firms.^[39]

In November 1990, President Suharto assured Japan that Indonesia will ensure an adequate supply of oil to Tokyo in the face of the Gulf crisis. In return, President Suharto urged Japanese Prime Minister, Toshiki Kaifu to resume Japan’s economic assistance and investment in Indonesia.^[40] In the same month, the Chairman of the Investment Coordinating Board, Sanyoto Sastrowardoyo said that Indonesia too dependent on investment from Japan and Western investors are urged to move quickly to drain their cash into the country's economic boom.^[41]

In December 1990, delegates from Singapore and Indonesia began a visit to Osaka and Tokyo as the first attempt to encourage Japanese companies to invest in the Riau Archipelago.^[42] More than 500 people are expected to attend two seminars to be held in Osaka and Tokyo.^[43] Indonesia and Singapore shared mission to promote Japanese investment in Riau seen success, with Indonesia expects a trade delegation from Osaka and Tokyo will visit the Growth Triangle in 1991.^[44] In the same month, Obayashi Corporation and Nissho Iwai Corporation from Japan has joined forces with an Indonesian firm to build a 21-storey office towers in Jakarta with a price of around US$ 37 million. Nissho Iwai spokesman said that the joint venture capitalized at about US$ 10 million.^[45]

[...]

^[1] Anonymous, Japan is Indonesia's top foreign investor in The Business Times, 26 February 1981, p. 12.

^[2] Anonymous, Joint ventures in forestry in The Straits Times, 16 April 1971, p. 5.

^[3] Anonymous, Pinjaman in Berita Harian, 11 October 1972, p. 3.

^[4] Anonymous, Suharto bid to boost ties with Japan in New Nation, 6 May 1972, p. 5.

^[5] Anonymous, Indonesia seeks Japan's co-operation in US$4OO mil project in The Straits Times, 8 September 1972, p. 30.

^[6] Anonymous, Japan is top investor in Indonesia in The Straits Times, 15 May 1975, p. 4.

^[7] Anonymous, Singapore is No 5 investor in Indonesia in New Nation, 26 February 1977, p. 2.

^[8] Anonymous, No signs of investment slowdown by Japanese in Jakarta in The Business Times, 10 March 1977, p. 12.

^[9] Anonymous, Investment priority shift in The Business Times, 14 March 1979, p. 3.

^[10] Anonymous, Ohira restui Konsep Gugusan in Berita Harian, 8 June 1979, p. 3.

^[11] Anonymous, Japanese investment in New Nation, 6 June 1979, p. 14.

^[12] Anonymous, Joint oil project in The Business Times, 1 September 1979, p. 1.

^[13] Anonymous, Japanese group to discuss Indonesian oil projects in The Business Times, 27 November 1979, p. 3.

^[14] Anonymous, Suharto receives Japanese mission in The Business Times, 30 January 1980, p. 3.

^[15] Anonymous, Jakarta diversifying sources of investment in The Business Times, 28 October 1980, p. 12.

^[16] Anonymous, Japan is top investor in The Straits Times, 18 November 1980, p. 1. See also Anonymous, Leading investor in The Business Times, 18 November 1980, p. 3.

^[17] Anonymous, Indonesia's top foreign investors in The Business Times, 11 January 1982, p. 12.

^[18] Anonymous, Foreign investment in The Straits Times, 6 December 1982, p. 19.

^[19] Anonymous, Largest investor in The Business Times, 17 August 1983, p. 1.

^[20] Anonymous, Japan wants better investment climate in The Business Times, 28 September 1983, p. 5.

^[21] Anonymous, Japan ahead in Indonesia in The Business Times, 15 January 1986, p. 16.

^[22] Anonymous, Indonesian investment mission seals 10 ventures in Japan in The Straits Times, 11 September 1985, p. 1.

^[23] Anonymous, Indonesia 'will rely on Japan for more trade' in The Straits Times, 9 November 1985, p. 8.

^[24] Anonymous, Tokyo-Jakarta trade likely to stay sluggish in The Straits Times, 12 January 1986, p. 7.

^[25] Anonymous, Japan 'likely to invest less in Indonesia' in The Straits Times, 18 March 1986, p. 11.

^[26] Anonymous, Japanese investors go cold on Indonesia in The Straits Times, 15 August 1986, p. 9.

^[27] Anonymous, Hantar misi dagang in Berita Harian, 16 October 1986, p. 1. See also Anonymous, Jakarta mission to drum up trade in The Straits Times, 16 October 1986, p. 9.

^[28] Anonymous, Japanese taking harder look at Indonesia in The Business Times, 23 January 1987, p. 4. See also Anonymous, Jakarta may lose Japanese investors in The Straits Times, 24 January 1987, p. 6.

^[29] Anonymous, Pelabur asing: Indon utamakan dasar negara in Berita Harian, 3 February 1987, p. 6. See also Anonymous, 'Least attractive investment' remark upsets Jakarta in The Straits Times, 3 February 1987, p. 5. See also Anonymous, Jakarta defends its investment policy in The Business Times, 3 February 1987, p. 1.

^[30] Anonymous, Jakarta denies Tokyo investors leaving in The Straits Times, 4 May 1987, p. 8.

^[31] Anonymous, Japan to buy more wood products in The Straits Times, 16 June 1987, p. 8.

^[32] Anonymous, Indonesia wants UP to invest more in The Straits Times, 15 October 1987, p. 11.

^[33] Anonymous, Jepun diseru tambah pelaburan in Berita Harian, 9 November 1987, p. 2.

^[34] Anonymous, Tokyo quietly stepping up assistance to Jakarta in The Business Times, 2 June 1988, p. 4.

^[35] Anonymous, Kaifu arrives in Jakarta for two-day visit in The Straits Times, 5 May 1990, p. 21.

^[36] Suzanne Soh, Sumitomo to invest $30m in Batam factories in The Business Times, 1 May 1990, p. 1.

^[37] Anonymous, Japan 'will not tie aid for Jakarta to human rights' in The Straits Times, 2 May 1990, p. 12.

^[38] Anonymous, Japan remains top source of investment in Indonesia in The Straits Times, 14 July 1990, p. 38.

^[39] Anonymous, Tokyo bank to promote Indonesian investment in The Business Times, 21 August 1990, p. 7.

^[40] Anonymous, Stable oil supply in The New Paper, 13 November 1990, p. 4.

^[41] Anonymous, Invest in Indonesia, Westerners urged in The Business Times, 22 November 1990, p. 32.

^[42] Nooraini Hamzah, Labur di Riau: Singapura, Indonesia anjur seminar di Jepun in Berita Harian, 8 December 1990, p. 12. See also Anonymous, Misi S'pura-lndonesia ke Jepun in Berita Harian, 7 August 1990, p. 1. See also Nooraini Hamzah, Pelabur Jepun diberitahu potensi Singapura, Riau in Berita Harian, 11 December 1990, p. 1.

^[43] Anonymous, Joint mission to promote Riau in The Business Times, 8 December 1990, p. 1.

^[44] David Chew, Japanese trade teams to visit Growth Triangle in The Business Times, 20 February 1991, p. 2.

^[45] Anonymous, Indon-Japan venture in The Business Times, 27 December 1990, p. 7.