Don’t expect US-China trade war to be 'short', warns Indonesia finance minister

With its young population attractive for investment, Indonesia is benefitting from the fall out between the US and China

Mulyani Indrawati, Indonesia's finance minister, speaks during an interview at the Emerging + Frontier Forum 2019 at Bloomberg's European headquarters in London, U.K., on Tuesday, June 25, 2019. Rocked by trade disputes, the possibility of a U.S. recession and the ever-present threat of political conflagration, the backdrop for emerging and frontier markets has rarely seemed less settled. Photographer: Luke MacGregor/Bloomberg
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Indonesia finance minister says the country is benefitting from a trade war between US-China as investors look to its young population, as she pointed out global markets will be buffeted by “long term competition” between the world’s two biggest economies.

“When we look at the original on how the trade war has been announced by the US, it is reacting to imbalances with China and other countries,” said Sri Mulyani Indrawati, Indonesia’s Minister of Finance.

“The nature of the issue is geopolitical… so don’t expect it to be short. It’s a competition between the first and second largest economies in the world.”

Speaking in London at Bloomberg’s Emerging & Frontier Forum, Ms Indrawati said investors had turned to Indonesia’s supply chains amid escalating tensions between Trump and Xi Jinping.

As the landscape becomes “more unpredictable”, she said Indonesia was in prime position given a number of key factors.

“We have a young demographic, and cheap labour; and both are open to innovation”.

Indonesia is the fourth most populous country in the world, with an average age of 30 years old.

A chorus of US firms, including tech giant Apple, have urged US President Donald Trump to drop more tariffs on Chinese goods.

The US has threatened $300bn worth of tariffs if it cannot agree a trade deal with China.

She sited Vietnam as a benchmark for fast economic growth, but said a key difference was Vietnam’s proximity to China.

“Vietnam has a different political system, but we have domestic demand and a growing middle class. So those two attractions that are very rare.”

Indonesia’s finance minister, who served as finance minister under the former president Susilo Bambang Yudhoyono, says the country is taking corruption firmly seriously, and said it was important protocols to fight it are in place and improved.

“When we become open and democratic, corruption is never totally eliminated. But we are fighting… we have awareness in people. It’s about whether there’s a system to check corruption, because it happens everywhere.”