Trade winds blowing strong
Iran, Indonesia to harvest fruits of cooperation: Officials
Iran and Indonesia are two Muslim nations with unique strategic positions and immense political, economic, and cultural significance within their respective regions. As such, according to experts, fostering cooperation between the two offers a multitude of benefits that should not be overlooked simply because they are not in each other’s immediate vicinity. Tehran and Jakarta already have similar, shared perspectives. The alignment of the two capitals in international affairs and within the Islamic world can further facilitate their respective development. This synergy is particularly salient as the governments of both countries have just changed hands and actively seek to broaden their relations with nations near and far. Iran’s strategic policies under the leadership of President Masoud Pezeshkian reflect a clear emphasis on expanding relations with the entire world, with a specific focus on East Asia, as articulated by Iranian Foreign Minister Abbas Araghchi. A review of Indonesian officials’ approaches in recent years also reveals this great Islamic country’s eagerness to enhance cooperation with friendly and like-minded nations in their western regions. Iran Daily conducted separate exclusive interviews with top figures that have their fingers on the pulse of the expanding cooperation between the two Muslim nations, including Indonesian Ambassador to Tehran Ronny Prasetyo Yuliantoro, former Iranian ambassador to Indonesia Mohammad Khosh-Heikal Azad, and Head of the Indonesia Department at Iran’s Foreign Ministry Mohammad Reza Shabani.
By Sadeq Dehqan
Staff writer
Best opportunity for bilateral cooperation
Mohammad Khosh-Heikal Azad is the former Iranian ambassador to Indonesia and a senior expert on East Asian studies at the Institute for Political and International Studies (affiliated with the Ministry of Foreign Affairs). He has served three terms at the Iranian Embassy in Indonesia as an embassy expert, deputy ambassador, and ambassador, and has written several books on the subject. During his years of service at the Iranian Embassy in Indonesia, the embassy made numerous efforts to develop bilateral relations under three different Indonesian presidents.
The former envoy has detailed the capacities of Indonesia in detail in his book ‘Indonesia and International Politics,’ which covers various cultural and economic issues in the Southeast Asian country up to the Yudhoyono era. “The main point made in this book is that Indonesia is a very important country in many respects. Given that Indonesia is the largest Muslim-populated country, understanding political Islam in this country is of great importance. I found that Indonesian political Islam is a moderate form that opposes extremism, separatism, and radicalism”.
Economically, Indonesia has great potential as well, and in Southeast Asia, it is considered a significant economic power. Assessments suggest that by 2045, it will be the fourth- or third-largest economy in the world. “Therefore, considering their long history of bilateral relations, Iran and Indonesia have the best opportunity to develop cooperation with each other,” he added.
Khosh-Heikal Azad’s other book, ‘Indonesia, the Land of Pancasila, Smiling Islam, Consultation, and Agreement’, explores the developments over the ten-year term of outgoing Indonesian President Joko Widodo, in addition to his former predecessors’, and provides a deeper understanding of Indonesia for those interested.
Iranian traders unlock East Asian markets
According to Khosh-Heikal Azad, during the three periods that he served at the Iranian Embassy, the level of relations between the two countries was raised each year. “I remember that during president Suharto’s era (1968–1998), the trade volume between the two countries was around $100 million, but now, despite some trade restrictions, assessments indicate that their bilateral trade has reached up to $1.2 billion,” he maintained. The official exchange rate, however, is stated to be lower than this amount. “In any case, our traders have found their way despite the existing restrictions and sanctions and are doing business with the Southeast and East Asian powers.”
The former ambassador noted that in a meeting between President Widodo and the Leader of Iran’s Islamic Revolution Ayatollah Seyyed Ali Khamenei in Tehran in late 2017, the two countries targeted $20 billion worth of trade, but a series of challenges, including sanctions, have impeded the full realization of this goal.
Mulling cooperation with emerging powers
The former Iranian ambassador stated: “Indonesians, as yet another actor on the international stage, have to take into account certain considerations, but overall, Indonesia, as an independent country and a proponent of the development of Asia-Africa cooperation at the Bandung Conference, seeks to develop cooperation with various countries, including Iran.”
The Bandung Conference was a significant event held in 1955 in Bandung, Indonesia, with the participation of 29 countries from around the world. The conference aimed to promote economic and cultural cooperation between Asia and Africa and oppose colonialism and neo-colonialism by the United States and the Soviet Union.
The 1955 Asian-African Conference in Bandung also gave birth to the Non-Aligned Movement, a significant platform for consultation and cooperation between the countries of the Global South. Indonesia just recently hosted another Asia-Africa conference and aims to further expand cooperation with African countries. Coincidentally, developing relations with the Global South, which refers to the emerging powers in Africa, Latin America, and especially East Asia, is also part of the Iranian president’s agenda.
According to Khosh-Heikal Azad, “President Pezeshkian’s programs explicitly mention developing cooperation with neighboring countries and emerging powers. Foreign Minister Araghchi also explicitly referred to Indonesia as an emerging power that should be given attention.”
Preferential trade deal a giant step
Implementing the preferential trade agreement (PTA) is a giant step toward increasing the volume of trade between the two countries. During late president Ebrahim Raisi’s visit to Indonesia last June, 11 documents and memoranda of understanding were signed between high-ranking Iranian and Indonesian officials. These memoranda covered a range of areas, including preferential trade, visa waivers, cultural exchanges, cooperation in pharmaceutical production supervision, and collaboration in scientific, technological, and innovative fields, as well as bilateral cooperation in the oil and gas sector.
The Ministers of Foreign Affairs, Communications and Information Technology, Oil, and the Vice President for Science and Technology, along with the Deputy Minister of Industry, Mine and Trade, signed these agreements with their Indonesian counterparts, highlighting the comprehensive nature of the cooperation.
The preferential trade agreement aims to enhance commercial exchanges and joint ventures between Iran and Indonesia. Additionally, it seeks to reduce or eliminate tariffs on goods, remove non-tariff and quasi-tariff barriers, create a safer and more predictable environment for sustainable trade growth, diversify trade exchanges, and promote and facilitate trade to enhance bilateral commerce.
With the world’s largest Muslim population, Indonesia offers a promising market for Iranian products. Indonesia’s imports from other countries total approximately $270 billion, while Iran’s share stands at less than $1 billion. However, the Indonesian market is highly receptive to Iranian goods, presenting a significant opportunity for growth.
The preferential trade agreement will include a range of products such as pharmaceuticals, rubber, paper, textiles, wood, shoes, cotton, electrical machinery, motor vehicles, manufactured goods, chemicals, and aluminum. On the other hand, Indonesian products such as vegetable oil, cocoa, coffee, tea, spices, fruits, vegetables, and fish are already highly popular in the Iranian market.
Indonesian envoy points out areas of cooperation
In an interview with Iran Daily, Indonesian Ambassador to Iran, Ronny Prasetyo Yuliantoro, underscored the potential for increased economic cooperation between Jakarta and Tehran, with the agreement serving as a pivotal stepping stone.
The ambassador added that the agreement has been signed by both parties and is currently undergoing finalization and revisions, awaiting official confirmation. Once confirmed, the implementation process will begin promptly, Yuliantoro assured.
Looking to the future, Yuliantoro highlighted the increasing role of IT and new technologies in the global economy. Given Iran’s strong technological advancements and IT infrastructure, he foresees significant collaboration between the two countries in these areas.
Furthermore, the ambassador drew attention to Iran’s abundant mineral resources, particularly iron and other metals. He emphasized that investing in minerals could be a mutually beneficial area of cooperation and investment for both countries.
Regarding the current trade volume between Iran and Indonesia, estimated at around $200 million, Yuliantoro expressed dissatisfaction. He attributed the low trade volume partly to the sanctions imposed on Iran and emphasized the potential for this figure to reach much higher levels with the full realization of the preferential trade agreement.
Adverse effects of sanctions, distance
Mohammad Reza Shabani, head of the Indonesia Department at Iran’s Foreign Ministry, also shared his insights on cooperation with Indonesia with Iran Daily.
Stressing that Indonesia is one of the largest countries in Southeast Asia and the most populous Muslim nation in the region, Shabani noted that the country boasts a high degree of religious freedom, with followers of various sects coexisting peacefully and harmoniously. “Indonesians embrace a pluralistic and broad-minded approach to religion and faith, which aligns with our perspective,” the Iranian official added.
He continued, “Our countries share a 74-year-old diplomatic relationship. Iran was among the first nations to recognize Indonesia. So, it’s safe to say that close ties bind our nations.”
Last year’s visit by the late Iranian president Ebrahim Raisi to Jakarta resulted in the signing of 11 cooperation agreements, “a truly unprecedented feat”. However, both Indonesia and the Islamic Republic of Iran have just witnessed changes in their respective governments, with presidential elections taking place within the last six months. On October 20, Indonesia will inaugurate its newly elected president, Prabowo Subianto. On the other hand, Tehran was compelled to hold an early election following the unfortunate helicopter crash involving president Raisi in May, leading to the formation of a new government under President Pezeshkian.
Therefore, despite exchanging messages after the untimely death of president Raisi and subsequently, after the inauguration of Pezeshkian and Indonesia’s Indonesia 79th Independence Day, the two new presidents have not yet had the chance to discuss more complicated matters.
On economic matters, Shabani remarked, “The distance between our countries, the lack of direct flights, and insufficient shipping lines have impeded us from fully tapping into the potential of our relations. The current trade volume falls short of what could be achieved, with distance and sanctions playing a detrimental role. Despite Indonesia’s open and non-aligned stance, certain sanctions-related obstacles, such as difficulties in opening Letters of Credit (LCs) and establishing banking relationships, have negatively impacted bilateral trade.”
Iran FM to focus on SE Asia
Shabani shed light on the Pezeshkian administration’s approach to international relations, explaining, “President Pezeshkian has a particular interest in enhancing cooperation with Indonesia and East Asia. Given Foreign Minister Araghchi’s previous experience as Iran’s ambassador to Japan, he is also to give special attention to the Southeast Asian region. Accordingly, the Ministry of Foreign Affairs aims to address the bilateral challenges currently faced by Iran and Southeast Asian countries including Indonesia.”
The Iranian official said that his department has drafted reports detailing the issues between Tehran and Jakarta and proposing solutions. In due time, he promises, the Foreign Ministry will work towards resolving these challenges.
Finalization of PTA should be expedited
Regarding the preferential trade agreement between the two countries, Shabani stated that the agreement is a positive sign that we can use to enhance our trade relations. The agreement is currently being reviewed in the Iranian Parliament. The official drew a contrast between the fact that the Indonesians approved the PTA within two months and are ready for its implementation on their end and the fact that on our end, the agreement is “still entangled in the administrative bureaucracy of the Parliament and the Guardian Council”. Four sessions have been held so far to discuss the implementation process. “There is some ambiguity about our next steps, but we hope to finalize the matter within the first few months of the new Iranian government.”
Pointing out that the Parliament cannot independently finalize this matter, he advised the government and relevant ministries to expedite their own processes to facilitate the swift implementation of the agreement. He also proposed that a commission comprising representatives of the Ministry of Trade, the Islamic Republic of Iran Customs Administration, and the Central Bank should be formed to determine what kinds of facilities the Iranian customs can provide for Indonesian imported goods. The Ministry of Industry, Mining, and Trade, he suggested, should also decide which goods will be subject to the preferences mentioned in the agreement.
“The agreement can significantly enhance our exchanges by giving preferences and slashing tariffs to a group of goods that one country possesses and the other country needs. This will naturally increase the volume of trade between the two countries. For example, we can receive palm oil, which we need, from Indonesia and provide them with our crude oil through our own mechanisms. We also have production advantages in the fields of health, defense, and military. During president Raisi’s visit to Indonesia, two tele-surgical robots were donated, and Indonesia expressed interest in purchasing more.”
The Foreign Ministry official maintained that Iran truly leads the region in the field of medical equipment. “It’s not just talk because, in reality, while everyone else is importing, we are manufacturing.” Shabani noted that Tehran is also working on establishing a direct line between Iran and Indonesia for tourism and passenger travel.
Culturally, he added, the two countries can cooperate as well, especially in religious tourism. “Given the significant number of Shafi’i followers in Indonesia, we can facilitate their visit to the relevant sites of this sect and Sunni Islam in Mashhad, which has already been agreed upon and is being pursued,” he concluded.