Indonesia Barter Sukhoi with Commodities to Drive Export in East Europe

Photo by Ministry of Defense

Jakarta (TheInsiderStories) – Indonesian Government trade off 11 units of Russian’s Sukhoi SU-35 with worth US$1.14 billion with Indonesian commodity exports. Both countries agreed to swap half of the value on the commodity export with total amount $570 million.

In Act No.16 of 2012 on Defense Industry, Article 43, states that every security units procurement from abroad shall also include local content and offset of at least 35 percent. Indonesian government then reiterated that the purchase of the SU-35 is accompanied by the purchase activity returns a value of 50% of purchase value.

“Compared to Malaysia and Vietnam that owned SU-30 series, this series is equipped with better technology, it can fire and bombard. Yet it costs S90 million per unit compared to regular series that cost $60 million per unit,” Minister of Defense Ryamizard Ryacudu, told press on Tuesday (22/8).

He stated, these aircraft will replace the F-5 Tiger II aircraft to improve defense and security in the country. Minister of Trade Enggartiasto Lukita added, with such scheme, Indonesia can export up to 50 percent of the purchase value of the SU-35.

“The percentage of the SU-35’s procurement is 35 percent in the form of offset and 50 percent in the form of return on purchase,” he said.

The agreement between two government was signed on August 10 in Moscow and will be effective later. Russian and Indonesian government agreed to appoint palm oil and rubber between state-owned trading company PT Perusahaan Perdagangan Indonesia and the Russian state conglomerate Helicopters and United Helicopters (Rostec) to implement the transactions.

According to the deal, Rostec will buy more than one export commodity, including processed rubber and its derivatives, crude and derivatives, machines, coffee and derivatives, cocoa and its derivatives, textiles, tea, footwear, processed fish, furniture, copra, plastic and its derivatives, resins, paper, spices, defense industry products, and other products.

Rostec was also free to choose exporters so they can get the Indonesian export products with high competitiveness.

“With this purchase returns, Indonesia can export new commodities to Russia,” said Lukita.

In the first half (1H) of 2017, Indonesia’s CPO and its derivatives export reached $202.47 million, machines $218.82 million, coffee beans $33.4 million, textile products $22.76, footwear $19.13 million, processed rubber $17.47 million, CCO and derivatives $17.42 million, processed cocoa $13.47 million, processed tea, $7.55 million, plastic and plastic products (including resin) $6.32 million, paper $5.6 million, processed foods $5.23 million, processed fruits $4.72 million, furniture U$3.41 million, spices $1.82 million, processed fish $0.88 million, other furniture $0.52 million, spice preparations $0.21 million, tea $0.19 million, and fruit $10,000.

Russia is the top 24 trading partner of Indonesia in 2016. The total value of trade Indonesia and Rusia recorded $2.11 billion last year. Indonesia had a surplus of $410.9 million non-oil commodity. Indonesian non-oil exports reach $1.26 billion, while the Indonesian non-oil imports from Russia reach $850.6 billion. Indonesian non-oil commodity exports to Russia in 2012-2016 grew 8.5 percent. (YW)