Lack of Infrastructures: A Barrier to Indonesia-Philippines Trade

On a clear day in mid-1947, RI-002, a Dakota C-47 aircraft, then the star of the fledgling Indonesian air force, landed at the Nielson Airport in Makati, Philippines with a load of quinine and vanilla owned by the Siliwangi Division. This was the first official export of Indonesia to the Philippines in the 20th century.

The aircraft was a US World War II military surplus bought with the savings of the former American serviceman who piloted the aircraft, Robert Earl Freeberg. The leader of the plane’s Indonesian crew, Petit Moeharto Kartodirdjo, who would later serve as Indonesian air force attaché to Manila, and would later join the PRRI rebellion, passed himself off as the co-pilot, although he had yet to learn how to fly.

The Dutch consul in Manila instigated the confiscation of the shipment and the arrest of the pilot and crew. But they were bailed out by Filipino sympathizers, notably Mindanao political firebrand Salipada Pendatun. Eventually a Philippine court ordered the release of the shipment. There was a ready buyer and the money, perhaps a few hundred pesos, went into the war chest of the Indonesian revolution.

Not as dramatic was the start of diplomatic relations between the two countries. Sixty-five years ago this week, the Philippines opened a consulate in Jakarta. The anniversary would pass unnoticed if not for the efforts of Philippine embassy chargé d’affaires Robert Manalo, commercial attaché Alma Argayoso and their colleagues to ensure that the event isn’t unremembered and unsung.

They’ve organized activities to promote economic exchange between the two countries, which, incidentally, are regarded as the two most promising economies among the members of Asean.

Earlier this year, Southeast Asia expert Karen Brooks rhapsodized, “Giant Indonesia soared during the last half decade, boasting high growth, low inflation, an extremely low debt-to-GDP ratio, strong foreign exchange reserves, and a top performing stock market. But it is the Philippines, the region’s other archipelago, that is now providing the biggest upside surprise. The Philippine economy expanded by 6.6 percent in 2012, and was among the fastest growing economies in the world in the first half of 2013, expanding by 7.6 percent.”

Recent stats, however, are sobering. The Indonesian economy grew by 5.0 percent in the third quarter this year, the slowest in five years and down from the second quarter growth of 5.1 percent. The Philippines fared better with a 6.4 growth in the second quarter. Both economies, marked by high rates of poverty, are vulnerable to global trends of a trade slowdown and a rise in interest rates.

It would help both if they traded more with each other. According to commercial attaché Argayoso, last year this amounted to $3.62 billion, with Indonesia enjoying a significant balance of trade advantage.

Actually the value of Philippine imports from Indonesia is more than three times that of its exports to this country. On investment relations, there’s not much speak of either. In sum the reality is but a small fraction of the potential.

There’s talk about the products of both countries being so much the same that trade can’t grow. That’s barking up the wrong tree. In fact between the two, there’s such a dearth of infrastructures that not much trade is possible.

In contrast, Indonesia’s economic relations with Malaysia, Thailand and Singapore are served well enough by existing infrastructures. Hence, the Indonesia-Malaysia-Thailand Growth Triangle (IMT-GT) is so much ahead of the Brunei-Indonesia-Malaysia-Philippines East Asean Growth Area (BIMP-EAGA).

President Joko Widodo has pledged to go on an infrastructures building spree that will boost economic activities in all Indonesia, including the eastern part that borders the Philippines. Here’s hoping the Philippines does something similar at its southern backdoor.

Lack of infrastructures is a nasty economic disease. But it’s nothing that political will to invest can’t cure.

By Jamil Maidan Flores Posted in El Indio

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