"The economic condition in South Africa is still quite challenging for us to be able to penetrate the market deeper and bring diverse Indonesian products here. However, in 2019, we got some positive indications, ranging from the commitment of several companies in Indonesia to bring representatives in South Africa, to new investment plans from South African companies to Indonesia," Ambassador Al Farisi stated.
He highlighted that some agreements, such as the Defense Cooperation Agreement and MoU in the Fisheries Sector, had almost reached the final stage.
"We hope that 2020 would bring about more encouraging development," Al Farisi remarked while expressing hope for intensifying relations between the two countries.
Since 2015, trade volume between Indonesia and South Africa had shown a fluctuating trend. However, the Indonesian ambassador was not overly concerned about the trade balance in 2018 that showed a surplus for the South African side.
He pointed out that increased purchases of capital goods from South Africa was a good sign of productive activities in Indonesia, chiefly linked to the need for intensive infrastructure development in recent years.
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Moreover, he pointed to Indonesia still holding vast potential to boost its exports, such as of automotive products, palm oil, and food and beverage products, to Sub-Saharan African countries.
Nevertheless, tariff barriers are still viewed as hindering trade relations between Indonesia and South Africa.
Indonesian Coordinating Minister for Maritime Affairs and Investment Luhut B. Pandjaitan -- during his working visit to Cape Town on December 18-19, 2019, -- met Minister of Trade and Industry of South Africa, Ebrahim Patel.
During the meeting, Minister Patel welcomed the preliminary discussion on the Preferential Trade Agreement (PTA) between both nations and expected a concrete step to begin with a study by a technical team in the start of this year.
Moreover, Minister Patel indicated several investment potentials by Indonesian businesspersons, especially the relocation of the textile and footwear industry.
The economic condition of South Africa and the surrounding countries, within the accreditation scope of the Indonesian Embassy in Pretoria, have influenced the Indonesian government’s strategy in its efforts to expand the African market for Indonesian products.
Low spending of the household sector in 2019 has demonstrated that South African consumers are still financially cautious. With the slowing economic growth at around 0.7 percent in 2019, South Africa is facing the problem of unemployment rate of 29.1 percent, thereby making it a country with the highest unemployment rate in the world.
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In response to such a condition, Ambassador Al Farisi believes the investment-led model is one of the most suitable mechanisms of cooperation between both nations. He argued that Indonesian businesses must consider investing in African countries that will in turn boost exports.
"Helping to accelerate the local economy through the opening of new jobs will ultimately increase awareness, demand, and purchasing power of the people for Indonesian products," Al Farisi pointed out.
"This can be done by exporting semi-finished products from Indonesia, among others, while the process of finishing products should be done through partnerships with local parties," he added.
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