Obama warms ties with Indonesia; volcano may cut trip


  • World
  • Tuesday, 09 Nov 2010

JAKARTA (Reuters) - U.S. President Barack Obama arrived in Jakarta on Tuesday for a visit aimed at boosting U.S. security and trade ties with Indonesia, and using the most populous Muslim nation to reach out to the wider Islamic world.

The visit to Indonesia, seen by Obama as an important destination for a variety of strategic and personal reasons, has been twice postponed and the White House said this 20-hour trip could be cut short because of atmospheric ash belched by eruptions from Mount Merapi volcano, 600 kms (375 miles) away.

Indonesia's importance as a U.S. ally is on the rise, even if the joy over Obama's election has faded since he became president almost two years ago.

Southeast Asia's biggest economy and a G20 member, Indonesia proved resilient to the financial crisis and has become a hot destination for emerging market investors looking to tap strong consumer demand, abundant resources and political stability.

"We see in Indonesia the intersection of a lot of key American interests, and we see this as a partnership that is very important to the future of American interests in Asia and the world," said Ben Rhodes, Obama's deputy national security advisor for strategic communications.

Obama's return to a country where he spent four years of his childhood comes after two previously scheduled trips were put off -- in March as he fought to pass his healthcare overhaul law and in June as he faced the cleanup of the massive BP oil spill.

This visit had been in doubt because of concerns about ash from Merapi, which led to international flight cancellations over the weekend and has killed over 130 people. Obama was also met by a tropical downpour that forced his welcome ceremony indoors.

Jakarta is the second stop on Obama's 10-day four-nation Asian tour. He spent three days in India, where his emphasis was on developing business links that could lead to U.S. jobs, and later will visit South Korea, where he attends a G20 summit and Yokohama, Japan, for an Asia-Pacific economic meeting.

The U.S.'s loose monetary policy, which has sent a flood of cash looking for higher returns towards emerging markets such as Indonesia, may be a topic for discussion ahead of the G20 meet.

COMPREHENSIVE PARTNERSHIP

Obama and Indonesian President Susilo Bambang Yudhoyono are expected to sign a "Comprehensive Partnership" agreed a year ago, ahead of a state dinner where Obama will be served childhood favourite dishes such as Indonesian fried rice and meatballs.

The pact covers security, economic and people-to-people issues, said Jeffrey Bader, Obama's top Asian adviser. Obama could announce hundreds of millions in funding to fight climate change by protecting Indonesia's forests, sources say, although large corporate deals have not been flagged.

The United States exports only about $6 billion worth of goods to Indonesia each year, making it America's 37th largest market, according to the U.S. Chamber of Commerce. Two-way trade, from U.S. soybeans and Boeing aircraft to Indonesian textiles, is likely to pick up slightly to around $20 billion this year.

However, the U.S. has dwindled in importance as a source of foreign direct investment into Indonesia, with just $171.5 million or 1.6 percent of the total last year, reflecting rampant graft, poor infrastructure and concerns on nationalist policies.

"Indonesia maintains significant and far-reaching foreigninvestment restrictions," said the U.S. Trade Representative's 2010 National Trade Estimates Report.

"Its investment climate continues to be characterized by legal uncertainty, economic nationalism and disproportionate influence of business interests."

While Obama is hoping for U.S. investment in sectors such as clean energy to help spur a sagging economy at home, growing direct investment is now coming more from Asia than the West.

Obama will also use his short stay to reach out to the Muslim world. On Wednesday he will visit the Istiqlal Mosque, one of the world's largest, and make a major outdoor speech that aides said is expected to draw large crowds.

Around 15,000 police and military are massing to maintain security, in a city that saw bomb attacks on hotels last year but that has made progress in tackling Islamic militancy.

The long U.S. wars in Muslim nations Afghanistan and Iraq have lost Obama support among Muslims since he made a major speech in Cairo in June 2009, and a pro-Palestine group protested on Tuesday against his visit outside the U.S. embassy in Jakarta.

(Additional reporting by Patricia Zengerle and Alister Bull travelling with Obama, Sunanda Creagh and Olivia Rondonuwu in Jakarta and Andrew Marshall in Singapore; Editing by David Fox)

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