Taking a strong stance against terrorism
AS THE WORLD'S LARGEST MUSLIM COUNTRY, LOCATED AT THE HEART OF A VOLATILE REGION, INDONESIA IS OF VITAL STRATEGIC IMPORTANCE. AS A RESULT, IT HAS PLEDGED ITS FULL SUPPORT IN THE FIGHT AGAINST TERRORISM

PRESIDENTIAL PALACE, JAKARTA President Megawati’s government is determined to strengthen U.S.-Indonesian relations.

Relations between Indonesia and the U.S. are strong and based on mutual political and economic interests. The U.S. is one of Indonesia's largest trading partners as well as one of the largest foreign investors in the country, together with Japan and the European Union.
The level of of U.S. direct foreign investment in the country reached $11.60 billion in 2000 from $6.77 billion in 1995.
Although the upward trend is likely to have declined at the end of 2001 due the world economic downturn after the terrorist attacks on September 11th, Indonesia's large consumer market continues to be a strong lure for U.S. companies.

The two countries share a mutual interest in regional security and Indonesia, as a majority Muslim country, is equally important for the U.S. in terms of political strategy. The recent support expressed by Jakarta for Washington’s campaign against terrorism has enforced Indonesia’s role as a key ally in today’s political scenario. Minister for Foreign Affairs, Hassan Wirajuda, comments, “ there is a saying that there will never be war between two democracies and Indonesia has proven that democracy and Islam are compatible. We have had a clear message from Washington, Japan and Australia. ‘We want you to succeed. We are ready to help you.’ With these sentiments, we know we have friends.”

THEO L. SAMBUAGA Chairman of the Board of Trustees of USINDO

Recent events have contributed to mounting international unease regarding Islamic extremists. The moderate Islam that predominates in Indonesia goes a long way towards assuaging these fears. “Indonesians are generally moderate and are very tolerant in terms of religion as a result of our ethnic diversity,” states Dr. Wirajuda. “We already had a belief system in place when Islam came to Indonesia in the 15th century, and so we kept our traditions from before Islam, which subdued our version of the religion.” Chairman of the Board of Trustees of USINDO (The United States-Indonesian Society), Theo Sambuaga says that U.S. culture is popular in Indonesia and that Indonesians welcome Americans to their country. “Indonesians are a very warm people and they like Americans. American styles are all over Indonesia, from food to music to fashion,” he explains.
The U.S. has also expressed support for Indonesia’s territorial integrity. The country is currently attempting to define the line between successful economic decentralization and a firm national unity. New provincial autonomy laws took effect in 2000. Foreign Minister Wirajuda states, “a very bold policy for us has been the introduction of wide ranging autonomy for local governments. And, on top of this, we have just now introduced special autonomy for Aceh and Irian Jaya. This is quite a departure from our previous centralized system of government.”

JAMES CASTLE Former Chairman of the American Chamber of Commerce in Indonesia

The effects of these changes on the foreign investor vary, according to business consultant and former chairman of the American Chamber of Commerce in Indonesia, James Castle. “Decentralization is an absolute good. The trouble is, in the short-term, it is really chaotic and difficult for large investors because they need big government. On the other hand, it is great for small and medium business which is why they have been driving the economic growth in the country,” he elaborates.

According to Mr. Castle, the most pressing problem for foreign investors has been the lack of legal certainty. Also, American companies have often found it difficult to adapt to the local business culture. Nevertheless, Mr. Castle believes that since the country has such vast reserves of natural wealth, investment levels will rise significantly once there is an improvement in the political scene. He states, “Indonesia is always a paradox. Right now, it may be one of the most troubled economies in the region, but it also has the highest growth in Southeast Asia. Despite its political problems over the years, the economy has continued to grow. The reason that it can do this is very fundamental: unlike Thailand or the Philippines, Indonesia has a very strong natural resource base–gold, oil, gas, and palm oil, not to mention the textile industry–on which to build.”