INDONESIA

Agreements and legal base. In 1998, the Russian Federation and the Republic of Indonesia completed a long negotiation process to prepare a set of intergovernmental agreements on economic relations for signing. In March 1999, during a visit by a Russian delegation headed by first Russian vice premier, a set of three intergovernmental agreements was signed: a Trade Agreement, an Agreement on Economic and Technical Cooperation, and a Double Taxation Agreement.

Russian-Indonesian trade in thousands dollars.

In March 1997, during a visit to Indonesia by a delegation from the Russian Chamber of Industry and Commerce, a new Agreement on Cooperation between the Chambers of Industry and Commerce was signed. In 1996, the sides exchanged drafts of an Agreement on Sea Navigation. Specific negotiations on the Agreement text were not held yet.

In 1993-96, bilateral relations developed mainly under accords reached at the governmental level on accelerated settlement by means of product deliveries of the Indonesian debt on previous state loans from the former Soviet Union (80% of Russian imports). Between 1993 and 1996, on the basis of an intergovernmental agreement, Indonesia supplied Russia with the following main products: palm products (US million); natural rubber and latex (US million); raw tea (US million); medication (US million), etc. An increase in trade turnover was observed: US million in 1993, US million in 1995, US million in 1996, followed by a drop in 1997 to US million and in 1998 to US million.

The pattern of mutual trade, despite a slight expansion, remains rather undiversified. The main Russian exports in 1998 were still metals and fertilisers, and traditional Indonesian plantation products predominated among imports.

Raw materials (94.2%) made the bulk of Russian exports to Indonesia in 1998. Deliveries of ferrous metals and metal products (US million) predominated in raw material export to Indonesia, which reach Indonesia through third countries, above all Thailand. Since 1997, Indonesia has introduced anti-dumping sanctions with respect to hot-rolled steel products imported from Russia through third countries. This decision was made by the authorities as a result of investigations conducted in 1996-97 by the Indonesian anti-dumping committee. Anti-dumping duties of 19% have been introduced by a committee decision with respect to products from the Novolipetsky Iron and Steel Combine, and 33% for other Russian exporters. Since January 1999, on a decision by the Indonesian government, temporary anti-dumping duties in the amount of 62% have been set for structural steel (wide strip beams, hot-rolled beams) imported from Russia through third countries.

Other important raw exports, as in previous years, are still chemical products (US million), and nonferrous metals (US million) The export of fertilisers dropped sharply from US million in 1997 to 1 million in 1998.

The crisis phenomena entailed a significant reduction in the export of machinery and technical products to Indonesia (US million in 1996, US million in 1997, US million in 1998). In so doing, spare parts for electric power and textile equipment accounted for a large percentage of deliveries.

In 1998, the import of raw and other materials and consumer goods from Indonesia amounted to US million. The overall import structure, as before, was mainly raw materials with the following percentage distribution: tobacco (26%), clothing and fabrics (19.1%), tropical oils (4.1%), tea (1.9%), cocoa products (1.8%), footwear (1.8%), furniture (0.8%) and coffee (0.7%).

Due to the extreme shortage of hard currency and in view of mutual supplementation of the Indonesian and Russian economies, it would be wise to develop such new forms of trade as reciprocal deliveries, the development of which is welcomed by the Indonesian government, which ambassador at large H. Joiohadikusumo confirmed when he was in Moscow in September 1998.

In order to develop counter trade, the Bank of Indonesia has already made interbank agreements with 13 countries, including Russia, Uzbekistan, Kazakhstan, and China. By means of reciprocal deliveries, Russia and Indonesia will be able to expand the range of goods, not only of traditional raw material products (fertilisers, metals, plantation products), but also to include more ready-made industrial products, as well as military-technical hardware. For example, in 1997-98, within the framework of reciprocal deliveries, Indonesia planned to purchase in Russia 12 Sukhoi aircraft and eight MI-17 helicopters. In the agreement signed in August 1997, the sides agreed to discuss a list of 40 Indonesian products proposed in exchange for the delivery of military hardware. However, due to the financial and currency crisis in Indonesia, this transaction has been put on hold.

Cooperation prospects. In 1998, work was continued to promote technology for raising oil output, using the vibroseismic techniques (VST) developed by VNIIGAZ, onto the Indonesian market, which makes it possible to significantly increase the oil yield of exhausted deposits. In 1998, a presentation of VST was held, a partner company was sought, and preliminary survey of several oil fields was carried out in order to prepare the pilot project. In March 1998, the draft agreement was drawn up on cooperation between VNIIGAZ and the Kaltex Pacific Company. Implementation of the VST pilot project began in the summer of 1999.

Deliveries of small floating nuclear power plants from Russia developed by the Nuclear Ministry are a possibility, especially for countries where the geographic conditions made the construction of ordinary nuclear plants difficult.

The Indonesian side has shown an interest in the possibility of purchasing Russian technology for manufacturing photoelectric transformers to be used within the framework of the national "million homes" programme.

In the future, scientific and technical cooperation between Russia and Indonesia could be developed in the following areas: power engineering, alternative communication techniques, space exploration, ship-building, car-building, environmental protection, and assimilation of the world's oceans.

The Novosibirsk Region and Indonesia are planning to sign a memorandum on cooperation which will make it possible to begin implementing projects in the area of tourism, the delivery of light and food industry products, and the exchange of high technologies. An agreement on this was reached on 27 April during a meeting in Novosibirsk between Regional Governor Vitaly Mukha and Indonesian Ambassador to Russia Mr. Chakhono. The enterprises took part in the exhibition of Export Potential of the Novosibirsk Region, held in October 1999 (organised by the Sibirskaya Yarmarka company). Indonesia delivers small amounts of palm oil, textiles and clothing to the Novosibirsk Region.

The percentage of Russian machinery and equipment in the total volume of Indonesian imports for the past 10-15 years did not exceed a mere 0.1%. The main reasons hindering introduction onto the Indonesian market of industrial and transportation equipment is the decrease in quality of Russian technical engineering products, the increase in consumer claims due to equipment defects, its deficiencies, etc.

Prices for Soviet/Russian industrial equipment, particularly for road graders, loaders, etc., used to be approximately 20-30% lower than the prices for Japanese-made machinery and 35-40% lower than the American. Prices for portable crushing and grinding equipment, jawbreakers and other grinders were approximately at the level of prices offered by competitors from Japan and Singapore.

Russian exporters of industrial and transportation equipment have come up against stiff competition from Japanese, American, European, South Korean and Taiwanese companies. Being the traditional suppliers of machinery and equipment, these countries usually export on the basis of long-term soft loans (both private and government). Many Chinese companies are continuing deliveries to the Indonesian market of technology similar to the Russian, but at lower prices..

In 1987-97, the following types of technical engineering equipment were delivered to Indonesia from the Soviet Union/Russia: KrAZ-2551 tow trucks, KamAZ trucks, bucket loaders, PPZ-F-1.6 press-sorters, DZ 171.106 bulldozers, hauling and farm tractors, metal-cutting lathes, welders, electric ovens, diesel generators, cryogenic equipment, stone crushers, textile equipment, separators, combustion equipment, self-propelled rollers, diesel ships, and diesel mills.

In particular, in 1997, stone crushers amounting to US,000, spare parts for combustion equipment (US,000), separators (US,000), rollers (US,000), diesel mills (US,000), and spare parts for textile equipment (US,000) were delivered.