Special Report

Development and opportunities of Indonesia-Cambodia economic relations

Development and opportunities of Indonesia-Cambodia economic relations

Indonesia once again exhibits batik and jewelries duringt  the 13th Cambodia Import-Export and One Province One Product Exhibition (CIE & OPOP). (KBRI Phnom Penh)

Jakarta,  (ANTARA News) - Indonesia and Cambodia this year celebrate the 60th anniversary of diplomatic relations that were initiated on February 13, 1959.

Indonesia and Cambodia have shared a close political, cultural, and historical relationship. However, the closeness between both nations still needs to be deepened to further intensify economic cooperation that can bring greater benefits to ensure the prosperity of people of both countries.

Hence, at the celebration of the 60th anniversary of Indonesia-Cambodia diplomatic relations, Cambodian Minister of Foreign Affairs Prak Sokhonn expressed hope that the two countries would continue to maintain sound relations and enhance bilateral cooperation in various areas, including in the economic field.

The governments of Indonesia and Cambodia, at a meeting between the two countries` foreign ministers in early February last year, had agreed to strengthen relations through the enhancement of bilateral mechanisms, particularly aimed at improving economic cooperation, especially in the investment, trade, and tourism sectors.


Investment

Considering the six decades of bilateral relations, investment cooperation between Indonesia and Cambodia has not developed rapidly, according to Indonesian Ambassador to Cambodia Sudirman Haseng.

The Indonesian ambassador remarked that, so far, no Indonesian state-owned enterprises (SOEs) or companies had invested directly in Cambodia.

Ambassador Haseng argued that the main obstacle preventing Indonesian entrepreneurs from doing business in Cambodia is a disproportionate perception of the country.

"This is partly influenced by inaccurate and outdated information. The image of most Indonesians with regard to Cambodia is that it is still underdeveloped," he pointed out.

In fact, Cambodia had, in recent years, experienced rapid economic growth to reach an average of seven percent, higher than Indonesia`s economic growth.

Hence, Haseng has encouraged Indonesian businessmen and SOEs to start doing business and investing in Cambodia. He also acknowledged that some have begun exploration to start doing business in Cambodia.

"Indeed, Indonesian investment in Cambodia is not as expected, but there is an increase in interest from Indonesian entrepreneurs to invest in Cambodia," Ambassador Haseng pointed out.

"Our investment does not have to be money from Indonesia, usually cooperating with multinational banks, but Indonesian companies doing projects. This is still considered an Indonesian investment, as it is carried out by Indonesian companies; only financial sources do not have to be domestic (Indonesia)," he stated.

He further reiterated that now is the right time for SOEs and Indonesian businessmen to start entering and investing in infrastructure development projects in Cambodia.

"Indonesian businessmen have to play a role and invest in infrastructure development projects for public facilities, telecommunications, and gas pipelines in Cambodia," the Indonesian ambassador noted.

In addition, Indonesian businessmen and SOEs were encouraged to start doing business by utilizing natural resources in Cambodia that were relatively unexplored and had yet to be optimally managed.

"Indonesian companies and SOEs need to explore minerals here, as there is still a lot of space, for instance, gold and oil content has not been well-explored here," he noted.



Trade

Unlike investment, trade cooperation between Indonesia and Cambodia is relatively good. The trend of trade balance between the two countries during the five-year period from 2013 to 2017 had continued to increase by an average of 10.86 percent.

The total trade value between Indonesia and Cambodia in 2017 had reached US$542.23 million, an increase of 19.9 percent from the 2016 trade value of $452.19 million.

During the January-October 2018 period, total trade between the two countries had increased 3.2 percent as compared to the same period in 2017 and reached $455.87 million, with a surplus for Indonesia amounting to $401.69 million.

Some commodities imported by Indonesia from Cambodia included apparel, rubber, and footwear. Meanwhile, Cambodia is a potential alternative market for Indonesian products, especially considering Cambodia`s industrial sector had yet to produce consumer goods and meet priority sector needs.

Some Indonesian products that have penetrated the Cambodian market comprise packaged food and beverage products, home care and automotive products, personal care, pharmacy, batik, fresh Snakefruit, and motor vehicles.

Indonesian pharmaceutical products are currently well-known among the Cambodian public, according to Ambassador Haseng. He also cited the fact that several Indonesian pharmaceutical companies had successfully marketed their products in the country, including Dexa Group, Kalbe, Soho, and Eagle Pharma.

"The market for Indonesian pharmaceutical products here is very promising since its quality is already well-known, and the price is affordable," he stated.

However, he added, Indonesia`s strategic industrial products, such as aircraft from PT Dirgantara Indonesia and defense products from PT Pindad, have not yet entered the Cambodian market.

Hence, in order to help more Indonesian potential products penetrate the Cambodian market, the Indonesian Embassy in Phnom Penh holds annual business meetings, business matching, and trade promotions, such as the Indonesian Trade and Tourism Promotion (ITTP) event as well as through participation in Cambodia`s export-import exhibition.

"We always hold exhibitions to promote Indonesian products and tourism. Last year, 85 Indonesian entrepreneurs had participated in the exhibition held by the Indonesian Embassy in Phnom Penh. We also invited Indonesian entrepreneurs to participate in various exhibitions held by the local government in Cambodia," Ambassador Haseng revealed.



Tourism

Unlike in trade, Cambodia is more fortunate in the tourism sector since more Indonesian tourists visit Cambodia than vice versa. This is also because Indonesia has a much larger population than Cambodia.

The number of Indonesian tourists visiting Cambodia in 2018 had reached 55,753 people, while 8,819 Cambodian tourists had visited Indonesia in the same year.

However, the Indonesian government is targeting an increase in the number of Cambodian tourists visiting Indonesia following a rise in the number of people from the middle-class group in the country.

"The number of Cambodian tourists visiting Indonesia has been increasing by about 15 percent per year, but we target it to increase at an average of 20 percent per year," Indonesian Ambassador Haseng stated.

He further explained that the number of people from the upper-middle class in Cambodia has increased along with the country`s rapid economic growth that had reached an average of seven percent over the past few years. Such economic improvement has made many Cambodians include tourism activities on their lifestyle list.

According to Ambassador Haseng, the most popular tourism destinations in Indonesia among Cambodian tourists are Bali and Yogyakarta. In fact, he added, several travel agents in Cambodia provide aircraft rent services for groups of Cambodian tourists visiting Bali.

Nevertheless, he further pointed to the absence of direct flight service between the two countries as a major obstacle impeding the increase in Cambodian tourist arrivals in Indonesia. Of the 10 ASEAN countries, only Indonesia and Brunei Darussalam do not operate direct flights to and from Cambodia.

"Thereafter, the challenge is related to connectivity. In fact, if direct flights were to be operated between Indonesia and Cambodia, then it would further increase the number of Cambodian tourists to Indonesia," Haseng pointed out.



Enhance cooperation

In order to enhance bilateral economic cooperation in the near future, Indonesia and Cambodia need to overcome some main obstacles, in the form of outdated perspectives on Cambodia`s economic condition and the lack of connectivity between the two countries, which, have, so far, led to low level of people-to-people contact between the two nations.

"The existing lack of interaction between people of the two countries will also make it difficult to enhance bilateral economic cooperation," Ambassador Haseng noted.

Regarding the outdated perspective, he noted that Indonesian entrepreneurs and businessmen need to renew their views on Cambodia since the country is in fact no longer an underdeveloped country and is becoming a developing nation, with rapid economic growth.

Meanwhile, the connectivity issue, especially related to the absence of Indonesian-Cambodian direct flights, is expected to be solved soon with the attempt to open the Jakarta-Phnom Penh flight route.

"Hopefully, there will be a direct flight soon. Intensive talks have been held to open direct flight routes between Jakarta and Phnom Penh. Hopefully, it would be realized in the next semester," Haseng stated.

The change in perspective and improvement in connectivity are expected to increase people-to-people contacts, especially interactions among Indonesian and Cambodian businessmen and SOEs, and in turn, it would likely enhance economic cooperation between the two countries.

In the end, sound economic cooperation and relations between Indonesia and Cambodia are not only about efforts to seek benefits from each other but also to help each other to improve the welfare of people in both countries.
Editing by Suharto

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