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Indonesia to Enter the 'Developed Country' League

Writer's picture: Asil AdilAsil Adil


Ambassador of Indonesia to Turkey, Dr. Lalu Muhamad Iqbal:

Indonesia to Enter the 'Developed Country' League

"Indonesia is a global leader in Islamic finance with assets totaling $199.5 billion and holds the largest number of accounts in participation banking worldwide, approximately 50 million accounts."

"Indonesia and Turkey's trade relations are complementary in many ways. In 2018, the trade volume between the two countries reached $1.8 billion, and this figure is expected to grow further in the future."

- Mr. Ambassador, for those who want to understand Indonesia’s economy, how would you evaluate it?

During the 1998 Asian Financial Crisis, Indonesia's economy was significantly impacted, leading many to believe recovery would be extremely challenging.

However, 23 years later, Indonesia has not only become the 10th largest economy globally in terms of purchasing power parity but is also a member of the G-20, a forum it will chair in 2022. As the world's 4th most populous country, Indonesia's demographic advantage provides a solid foundation for economic growth.

Within the Muslim world, Indonesia stands as the largest economy, with a GDP reaching $1.058 trillion in 2020 (World Bank), reflecting its economic strength. Despite recording a contraction of -2.07% in 2020 due to the global impact of the COVID-19 pandemic, the economy is projected to rebound with 4.0% growth in 2021, supported by robust policies.

Indonesia also ranks among the global leaders in the halal economy. According to the "Indonesia Halal Market Reports 2021/2022" published by the Indonesia Halal Lifestyle Center and DinarStandard, the country retains its fourth position in the Global Islamic Economy Indicator (GIEI) rankings. It ranks second in halal food indicators and remains in the top 10 across other halal economy sectors. In 2020, Indonesia emerged as one of the largest global suppliers of halal and related products to OIC member countries, with halal product exports valued at $8.5 billion. This positions Indonesia as the 10th largest global exporter and the second-largest among OIC countries.

Indonesia's dominance extends to Islamic finance, with $199.5 billion in assets and the largest number of accounts in participation banking globally. In 2020, it was the largest sovereign sukuk issuer on the international market, with a total issuance of $20.65 billion, accounting for 22.18% of all sovereign sukuk issued worldwide.

According to the OECD, Indonesia is expected to transition from a middle-income to a high-income or developed country by 2045. Additionally, the "World in 2050" report by PricewaterhouseCoopers predicts Indonesia will become the fourth-largest global economy by 2050, with a GDP of $10.5 trillion and a per capita income of $32,600.

- The trade volume between Turkey and Indonesia reached nearly $1.8 billion in 2018, but it began to decline afterward. Given the high trade potential between the two countries, how can this trade volume increase?

Indonesia and Turkey are both G-20 members and significant players in the global economy. According to Indonesia's Ministry of Trade, the trade volume reached $1.8 billion in 2018 but declined to $1.3 billion due to the global impact of the pandemic.

The trade relations between Indonesia and Turkey are complementary in many ways. Indonesia primarily exports raw materials and semi-finished products to Turkey, such as synthetic staple fibers, palm oil, rubber, and iron and steel, which are further processed by Turkish industries into finished products. Conversely, Indonesia mainly imports industrial goods from Turkey.

Considering the size of both economies, I am confident that trade exchanges between Indonesia and Turkey will grow in the coming years. In this context, we hope both parties will finalize the Comprehensive Economic Partnership Agreement, which will pave the way for mutually beneficial trade relations.

- Turkey has initiated a significant development campaign. Would Indonesia be interested in participating in these projects through partnerships between state and private firms?

One of the high-potential economic collaborations between Indonesia and Turkey lies in the construction sector. The Indonesian government prioritizes infrastructure development, offering opportunities for Turkish contractors to contribute and invest in this sector.

In this regard, Indonesia's Foreign Minister and the Minister of Public Works and Housing visited Turkey in October and early November 2021, respectively. During these visits, possible collaborations in the construction sector were discussed, leading to the signing of a Letter of Intent by three Indonesian and Turkish firms. This letter also opens opportunities for Indonesian and Turkish companies to work on construction projects in third countries. With vast experience, the possibilities for collaboration in the construction sector are limitless.

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