Indonesia is ‘only loser’ as US-China trade war provides Asean investment boon

Vietnam is the biggest winner, while Malaysia, Singapore and the Philippines have all picked up business from manufacturers shifting their supply chains

But Jakarta is taking note, with President Widodo pushing his cabinet ministers to take advantage of the situation

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Indonesian labourers work at a construction site in Jakarta. The country has missed a wave of manufacturers seeking to bypass higher tariffs from the US-China trade war, according to two private sector economists. Photo: AFP

Published: 7:01pm, 4 Oct 2019Updated: 9:51pm, 4 Oct 2019

Indonesia is the “only loser” among Asean countries for failing to attract manufacturers seeking to bypass higher tariffs from the US-China trade war, two private sector economists in Singapore said on Friday.

The pair from brokerage firm Maybank Kim Eng said Vietnam, Malaysia, Singapore and the Philippines had picked up business – mostly in the form of higher foreign direct investment (FDI) – as Washington and Beijing’s tit-for-tat tariff impositions over the past 13 months upended supply chains and unleashed economic volatility across the world.

Lee Ju Ye, one of the economists, said Vietnam had emerged as the “biggest beneficiary”, with a 73 per cent jump in FDI inflows from China and Hong Kong last year. In the first half of 2019, its FDI applications surged 211 per cent.

Malaysia also recorded an influx of Chinese money, picking up early this year after nearly two years of decline, while Singapore was also a winner as firms moving to Malaysia were likely to take a loan from the city-state’s banks.

“Even the Philippines, which is not really known as a manufacturing site, is also receiving FDI applications,” Lee said. “The only loser seems to be Indonesia.”

Still, she said Indonesian President Joko Widodo’s administration was taking notice. Last month, Widodo – who was earlier this year elected for a second term on the back of promises to boost Indonesia’s economy – demanded that his cabinet ministers work harder to take advantage of the shift in supply chains.