Worst-kept secret: Israel, Indonesia do business together

Despite no official relations, Jerusalem has built up substantial ties with world’s largest Muslim country

Indonesians take a selfie photograph as they gather during a countdown event to celebrate the New Year in Jakarta on December 31, 2015.  (AFP PHOTO / Bay ISMOYO)
Indonesians take a selfie photograph as they gather during a countdown event to celebrate the New Year in Jakarta on December 31, 2015. (AFP PHOTO / Bay ISMOYO)

One of the worst-kept secrets in the business world is the growing business and tech ties between Israel and the biggest Muslim country in the world – Indonesia.

“There’s already a great deal of business going on between Indonesia and Israel, said one of the Indonesia’s top venture capitalist investors. “Indonesia is a quickly growing country with a lot of needs in areas where Israeli tech has made important breakthroughs, like agricultural technology.”

Still, politics is politics, and although the Indonesian investor spoke to a crowd of over 600 in Tel Aviv Wednesday at the second annual Israel Foreign Trade Conference – presenting his name and affiliation – his representative requested that his name not appear in this article.

“You never know who’s reading,” said one Israeli official charged with setting up the investor’s visit. “It was hard enough to get him to come to Israel. We don’t want to be responsible for endangering him at home.”

That statement could be a parable for the dilemma Israel and Indonesia find themselves in – close trading partners, but only under the radar. The extent of trade between Israel and one of the most populous countries in Asia – one that does not have diplomatic relations with Israel – isn’t necessarily news to people in the know.

Participants at the 2016 Foreign Trade Conference in Tel Aviv (Courtesy)
Participants at the 2016 Foreign Trade Conference in Tel Aviv (Courtesy)

According to officials at the Foreign Trade Association of the Economy Ministry, Israel and Indonesia are long-time business partners, with trade reaching “hundreds of millions of dollars a year,” said to FTA head Ohad Cohen.

“Indonesia is a democracy, and it’s a member of the World Trade Organization, which bans boycotts of member countries, so there are no legal restrictions on Indonesian companies that prevents them from doing business with us,” said Cohen. “Business people there know what their market needs are, and they know we can fill those needs, so they are happy to do business with us.”

Still, Cohen acknowledged that politics tended to get in the way of what could be a flourishing open relationship, instead of a flourishing secret one. “When we achieve regional peace, these things will become a lot easier.”

Ohad Cohen (Photo credit: Courtesy)
Ohad Cohen (Courtesy)

The FTA conference was essentially a “meet and greet” for hundreds of entrepreneurs and investors to get to know the work of the organization – and to meet the economic attachés that serve in foreign countries. There are Israeli trade delegations in 41 countries around the world, with representatives in most European countries, as well as in the US, China, India, Brazil, Australia, Japan, Mexico and several other Latin American countries.

The conference featured speakers from these offices as well as local and industry experts, who discussed topics such as how to do business in foreign countries like China and India, legal issues affecting investment abroad, the impact of the world economy on Israeli businesses, and much more.

Indonesia is not one of the countries where Israel has a trade mission; administrative matters there are handled by the country’s representative in Singapore, who makes frequent visits to Jakarta to make introductions and help close deals for Israeli companies in the country. And according to the guest from Indonesia, there is plenty of opportunity there for Israeli firms of all types.

“A lot of services and products are underpenetrated,” he said. “Only 26% of Indonesians have smartphones and only 36% have bank accounts. We’re fourth out of five among the large Southeast Asian countries in these and many other areas, so there is plenty of room for growth.”

And the growth that the government is seeking is the kind of growth that Israel can help supply, the investor said. “One big problem for Indonesia is that 60% of our exports are commodities, like coal and palm oil.” He said that the government is afraid that dependence on commodities could turn it into another Venezuela – the “poor rich kid” of the international economy, awash in oil that it cannot make money on due to the low market prices.

“Tech appears to be a much better way to go, and the government has been putting a lot of effort into encouraging investments in start-ups and high-tech firms,” he added.

That is where Israel comes in. “Israel is full of tech companies, and we are big adapters of advanced tech, like big data and other areas Israel specializes in. Agritech is always a need, and I know of a number of companies already working in that space.”

Medical tech, mobile and financial technology are all welcome as well, the investor said. Perhaps surprisingly, there is even an Israel-Indonesia Chamber of Commerce, which posts on its web site success stories of Israeli firms that have done business in the country.

But despite the progress on the economic front, there is still a seemingly unbridgeable diplomatic gap between the two countries. Last August, for example, Indonesia held up a visa that had been promised to Israeli badminton star Misha Zilberman, forcing him to wait in Singapore for two weeks before he was allowed in to participate in the World Badminton Championships. Even when he was allowed in, Indonesian authorities would not allow the Israeli delegation fly their flag – and according to Zilberman, he received a lot of nasty comments from people who claimed to be Indonesian on his Facebook page, threatening to kill or harm him if he “dared” set foot in the country.

All true, said the investor – but the headlines don’t tell the whole story. In fact, he said, “just a few weeks ago a bill was approved that would have made Israel one of several dozen countries from which visitors to Indonesia would not need a pre-approved visa. Israel was struck from the list at the last moment, but I find it very interesting that it was included in the first place.

“They say that the difference between business and politics is that in business it’s easy to tell who’s right and who’s wrong, but in politics there is no right and wrong – just what is suitable for a government at the time. When the time comes, I am sure this “convenience” will lead to warmer relations between us.”

As a matter of fact, he added, “I have with me in my delegation a former government minister of one of the senior ministries in the country. That has to mean something, I think.”

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