Biden Becomes US President, How Can Indonesia Take Advantage?

JAKARTA, KOMPAS.com – Joe Biden’s victory in the 2020 United States presidential election (Pilpres) is a positive sentiment for Indonesia’s financial markets. The Jakarta Composite Index (IHSG) and the rupiah exchange rate strengthened in line with the inflow of foreign capital.

According to Bhima Yudhistira, an economist at the Institute for Development of Economics and Finance (INDEF), investors began to reinvest their funds in emerging market countries in response to Biden’s victory.

Investors see Biden will be able to reduce the escalation of the US and China trade wars, the handling of Covid-19 which will be more serious, and the US economic stimulus will be greater. This is a sign that the superpower’s economy will recover globally.

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“So that foreign funds have entered the stock exchange, IHSG rebounded, the rupiah strengthened. The market welcomed Biden’s victory,” he said in a virtual discussion about the impact of the US Presidential Election on Indonesia, Tuesday (17/11/2020).

However, Bhima emphasized that Indonesia could not only take advantage of Biden’s victory by increasing investment in the financial market, but must be followed by an increase in foreign direct investment (FDI).

Because, through direct investment, it will have more impact on the national economy, considering that the funds invested will be greater for a long period of time. On the other hand, it can encourage job creation.

“Actually, our big task is to convert the hot money that goes into the portfolio into FDI. Investments that tend to absorb labor. So don’t just keep turning on the financial market, it’s easy to enter but easy to get out,” he explained.

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In addition, Bhima also assessed that Indonesia must improve its readiness trading to be able to take the opportunity to export goods to the US. According to him, Indonesia could lose to Vietnam, which also made the US an export market.

He said, when compared to Vietnam, Indonesia’s trade potential to the US was much lower. Indonesia is superior in terms of commodity auxiliary goods, raw materials, livestock products, chemicals and pharmaceuticals, and wood.

Meanwhile, Vietnam excels in capital goods, consumer goods, processed food products, footwear, leather products, electronic goods, basic metals, mining goods, as well as textiles and apparel.

“You could say that more than 60 percent of us are less competitive with Vietnam (in terms of exports to the US),” he said.

Bhima assessed that Indonesia could take advantage of trade opportunities to the US by improving the quality of products related to the environment. This is because one of the focuses of Biden’s policies in the future is indeed pro-environment.

According to him, currently there are many developed countries that apply the principle of using products that guarantee environmental sustainability, such as the European Union and the UK. This step could also be taken by Biden, who is indeed a pro-environment.

“For companies in Indonesia, it is better to comply with environmental certification to be more sustainable in doing business if the target market is the US, or to get investment from the US,” concluded Bhima.

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