International Policy Digest

Øystein Solvang/NHD
World News /28 Oct 2020
10.28.20

Why Indonesia Needs to Strengthen its Ties with Oman

Early this month, the UAE’s embassy in Jakarta organized a high-level virtual dialogue in cooperation with the Indonesian Chamber of Commerce. Cooperation between Indonesia and the UAE has recently increased. This is not only in the political and economic fields, but it has also expanded into cultural fields.

However, in the midst of Indonesia’s growing cooperation with larger countries of the Gulf, Jakarta’s ties with smaller regional states have been relatively modest. Oman exemplifies this case and for several reasons, Indonesia should try to also strengthen its ties with countries like Oman.

Economic cooperation is still limited

Economic ties between the two countries have been taking place, albeit at very modest levels. As the fourth most populous country in the world, Indonesia has been a market for Omani goods. Figures show that Oman has exported an array of products to Indonesia. Oman’s exports to Indonesia are dominated by hydrocarbons ($100.7 million), chemicals ($23.7 million), and metals ($3.8 million).

Oman is one of Indonesia’s export destinations. Most of the products exported to Oman include motor vehicles, palm oil, veneers, and non-alcoholic drinks. Trade remains minimal compared to Indonesia’s trade with other Gulf countries. With Saudi Arabia, for instance, trade with Indonesia amounted to $4.5 billion in 2015.

Mutual investment is also present between the two nations. The most notable Omani investments in Indonesia are $80,000 in the agricultural sector and $131,000 in natural gas filling and transportation stations.

Indonesia has also made its way to Oman, especially for energy exploration and production agreements. PT Medco Energy International, for example, has been operating its wholly-owned subsidiary Medco Oman LLC, which possesses a 55 percent participating interest in Karim Small Fields. Given that its own energy reserves are being quickly depleted, Indonesia’s reliance on the Gulf’s energy is expected to increase in the coming years. Medco was also planning to acquire assets in Oman. Indonesia’s national petroleum firm Pertamina was in negotiations with Oman for the takeover of petroleum and natural gas assets in the Gulf.

These developments are small if compared, for instance, to the case of the UAE. There are 11 business agreements between the UAE and Indonesia, with a total value of $22.89 billion.

Despite remaining limited, the two countries have some strong reasons to build their economic ties further. Indonesia’s geographical position as Southeast Asia’s biggest economy and a G20 member should convince Omani policymakers that it is a target for investment. At the same time, with a population of over 250 million, Indonesia is a promising market for Omani exports.

For Indonesia, which has in recent years been probing to expand its consumer markets against the danger of potential economic tumult in Asia, Oman not only provides Indonesia a road to access untapped export markets and worthwhile investment opportunities, but it also offers the possibility to actually serve as a hub for economic expansion in the Gulf and the wider Middle East. Although it is Southeast Asia’s largest economy, Indonesia still needs to attract billions of dollars in investments to improve its fledgling economy, which has been impacted tremendously by the COVID-19 pandemic.

The latest meeting between Indonesia’s foreign minister, Retno Marsudi, with Oman’s foreign minister, Yusuf bin Alawi, to discuss the economic partnership indicates that the two countries realize their respective importance.

Other strategies have been employed to increase investments and joint projects between both countries. The Oman Chamber of Commerce and Industry and the Indonesian Chamber of Commerce and Industry signed a Memorandum of Understanding, which aims to explore investment opportunities and to increase the trade volume between the two countries.

Cultural cooperation could help Indonesia-Oman relations

There are many commonalities between Jakarta and Muscat which could cement their cooperation. For example, Oman has been trying to present itself as an Arab country that upholds the values of diversity and tolerance. Their status as Muslim-majority countries can also be a strong reason to form strong ties.

Such commonalities could be conveyed through cultural cooperation. Although there have been ties in the cultural sphere between Indonesia and Oman, it has been limited as well. People-to-people exchanges have also taken place in the form of tourism. In 2018, there were 26,376 Omani tourists visiting Indonesia. This number increased by 61.4 percent from the number of visits in 2017, namely 16,568 tourists.

Last year, Oman Air agreed to take part in introducing Indonesian tourism in the Sultanate. This initiative was taken after the introduction of a visa-free agreement between the two countries in February 2019. Such initiatives could help the two countries to increase exchanges among their people, which can also become a means of cultural ties between Indonesia and Oman.

Although the number of tourists is gradually increasing, the number of Indonesian students pursuing education in Oman and vice-versa is not significant compared to the other Gulf countries, such as Saudi Arabia.

With similar Islamic background and moral values, Jakarta and Muscat need to exert more efforts to overcome linguistic-cultural barriers by increasing their cultural cooperation. Such will make the two countries closer, politically, and economically.