Jakarta (The Jakarta Post/ANN) - Indonesia's own version of a China containment policy, which takes the form of nationalistic and protectionist regulations, has hurt the country's long standing trading partner, Japan - a situation that could easily turn for the worse if government officials fail to exercise good diplomacy, experts said.
The spat between Indonesian and Japanese officials intensified recently when the former sent a letter to the Energy and Mineral Resources Ministry threatening to terminate imports of paper should Indonesia insist on taxing metal ore exports.
Japan, the world's second-largest nickel consumer, previously threatened to file a complaint with the World Trade Organisation (WTO) in response to new changes in Indonesia's mineral trade policy.
Newly appointed Indonesian Energy and Mineral Resources Deputy Minister Rudi Rubiandini responded to the threat saying that the country could easily terminate its supply of liquefied-natural gas (LNG) to Japan. Japan is Indonesia's largest LNG buyer, purchasing 172 out of 362 cargoes exported last year.
Djisman Simandjuntak, the chairman of the Board of Management of the Centre for Strategic International Studies (CSIS) and also the executive director of Prasetiya Mulya Business School, said worsening relations with Japan was a result of a shift in Indonesia's trade policies, which he said had taken a more "protective and nationalistic" path compared to 25 years ago.
He suspected the policies were motivated by concerns over the free trade agreement with China.
"Many Indonesian producers have changed their strategies, from manufacturing to distributing goods because they cannot compete with cheap and mass-made products from China. Maybe this fact ignited the new sense of nationalism," he said.
The Indonesian government issued a set of regulations on May 6 that imposes tougher requirements on the export of 65 types of raw minerals, including metal ores, and introduces a 20 per cent export tax.
The regulation is deemed necessary to secure and curb the over-exploitation of resources ahead of the full implementation of a ban on raw mineral exports in 2014. Similarly, protectionist policies were introduced earlier: the ban on raw rattan exports, the limitation of import gateways for horticulture produce and the limitation of product categories for importers.
"Indonesian and Japanese officials have to really know the limits to be able to prevent things from escalating. These frictions must not affect other fields. What is at stake is a very important building block of our external economic relations," he said.
Indonesian Institute of Sciences (LIPI) economist Thee Kian Wie also acknowledged that Indonesia had lately opted for a more nationalistic approach in terms of policies. He said this was legitimate as long as the policies were based on rational economic calculations.
"Japan is an important country to Indonesia. It exports capital-intensive goods, machines and other mechanical components. It is also a potential market for our products," he said.
Between January and April 2012, total trade between the two countries reached US$18.45 billion, up 12.55 per cent from a year earlier. Indonesia exported $10.7 billion of commodities and goods to Japan, while its imports stood at $7.75 billion between January and April this year.
Indonesian Foreign Ministry director for East Asia and the Pacific Dewi Savitri Wahab said conflict was common in international relations and Indonesia-Japan relations were no exception to that.
"Every country has its own policies, including Indonesia and Japan. We try our best to explain our policies and so far our Japanese counterparts have accepted the explanation. We are mature enough to address our problems," she said.