Emperor Naruhito's Visit Further Strengthens Indonesia-Japan Friendship

JAKARTA – Emperor Hironomiya Naruhito made his first overseas visit, and he chose Indonesia on June 17, 2023. This is a sign that Japan will continue to strengthen bilateral relations with Indonesia.

Moreover, reportedly, Japan has a strong desire to participate in the development of the National Capital (IKN) of Nusantara, especially in the field of infrastructure and renewable energy related to net zero carbon emissions.

Cooperation between Indonesia and Japan has existed since 65 years ago. In the economic field, the realization of Japanese investment in Indonesia during the leadership period of President Joko Widodo (Jokowi) showed a positive trend. Even though it fluctuated, the realization was never below US$2 billion per year.

In fact, it tends to increase after the 2019 COVID pandemic in 2020 and 2021. In 2022, Japan's investment value will reach US$3.56 billion, up from US$2.26 in the previous year. Placing Japan as the fourth largest foreign investor in 2022 after Singapore, China and Hong Kong.

The three provinces with the largest investment projects from Japan until the fourth quarter of 2022, according to the Japan-Indonesia Partnership Lounge (Jaipong), are West Java with 4,128 projects, DKI Jakarta with 2,162 projects, and East Java with 666 projects.

Japanese investment mainly comes from the motor vehicle industry sector; electricity-gas-water, housing, offices and industrial areas; as well as the chemical and pharmaceutical industries.

Likewise the total trade between Indonesia and Japan. According to the Ministry of Foreign Affairs' website, its value in the January-October 2022 period has reached US$34.79 billion. An increase of 33.35 percent from the same period the previous year.

The trade value has even exceeded the value of bilateral trade with Japan before the pandemic in 2019 which recorded a value of US$31.6 billion. In 2022, Indonesia recorded the highest trade surplus with Japan, reaching US$6.3 billion, or a 158.5% jump from the surplus value in 2021.

Now, not only in the economic field, cooperation between Indonesia and Japan has expanded to the realm of politics, socio-culture, and the protection of Indonesian citizens.

The intensity of increased cooperation is also reflected in the field of defense through the participation of the Japan Ground Self Defense Force for the first time in joint exercises 'Multilateral Super Garuda Shield 2022' in August 2022 in Indonesia.

President Jokowi did not deny that Emperor Naruhito's visit would further strengthen the foundations of friendship between Japan and Indonesia.

"Friendship between peoples, between countries, between Japan and Indonesia is important to continue cultivating amidst the various challenges the world is currently experiencing," he said while giving a press statement with Emperor Naruhito at Griya Anggrek, Bogor Botanical Gardens on 19 June 2023.

Rivalry between Japan and China

Emperor Naruhito's visit is also believed to be Japan's move to secure its position over Chinese domination in Indonesia. It is undeniable that trade rivalry between Japan and China in Indonesia is very strong, even since the last 10 years.

For example, in the electronics industry in 2016. Poltak Partogi Nainggolan noted that the prestige of the Japanese electronics industry was fading when JVC Kenwood Corporation liquidated its subsidiary.

Two Japanese electronics companies, Panasonic Lighting Indonesia (PLI) and Toshiba also stopped their operations in Indonesia. The PLI factories in Pasuruan, East Java and Bekasi, West Java were closed in January and February 2016, while the Toshiba factory in Cikarang which is said to be the second largest factory after Japan closed in April 2016.

Chinese companies then acquired several Japanese companies, such as Toshiba which was acquired by Skyworth from China and Sanyo Electric by Haier Group.

“Many Japanese companies have given up their business because the potential for electronic business is no longer lucrative. They are unable to compete with China, because of the high selling price. On the other hand, they were late in diversifying their products," wrote Poltak in the book "Indonesia dan Rivalitas China, Jepang, dan India".

Not only electronics, competition also occurs in the Indonesian automotive industry sector, which has been dominated by Japan. Apart from having a car assembly plant in the Sunter area, North Jakarta, China has also built its automotive company, PT SAIC General Motors Wuling in Cikarang, West Java.

Wuling products compete with other Japanese products in the passenger car category and have made it into the top 10 of the Indonesian car market in just one year.

Another Chinese company, DFSK (Sokon) has also launched products that are ready to compete with brands such as the Honda CR-V and Nissan X-Trail.

Likewise in the transportation sector, for example in the MRT and high-speed train construction projects. The Japan International Cooperation Agency (JICA) can convince Indonesia to work on the Phase 1 and 2 MRT projects.

However, JICA failed in the high-speed rail project. JICA has shown its seriousness by submitting proposals twice, most recently on August 26, 2015. JICA offered a high-speed train investment of US$6.2 billion with a loan period of 40 years, interest at 0.1 percent per year with a grace period of 10 years.

China then offered a cheaper investment value than Japan, amounting to US$5.5 billion with an investment scheme of 40 percent Chinese ownership and 60 percent local ownership originating from a consortium of BUMNs.

Of the estimated investment, around 25 percent will be funded using shared capital and the remainder will come from loans with a tenor of 40 years and an interest of 2 percent per year.

"After the defeat of the proposal, the reality is that relations between Japan and Indonesia have not subsided. Because, then an offer appeared to Japan for the construction of the Patimban port in Subang Regency and the construction of the Jakarta-Surabaya Medium Railway," said Poltak.

Japan and China will of course always be strategic partners for Indonesia. Similar to Japan, Chinese investment realization in Indonesia also continues to show a positive trend.

As is known, Emperor Naruhito and Empress Masako will be in Indonesia for seven days and will return to Tokyo, Japan on June 23, 2023. Apart from visiting the Lebak Bulus MRT Depot and Pluit Reservoir Pump Station, the Emperor will also meet the 10th Sultan Hamengku Buwono at the Yogyakarta Palace.