Israel and Indonesia: Window of Opportunity?

By Emanuel Shahaf | CEO - Technology Asia Consulting Ltd | Sep 21, 2014
Israel and Indonesia: Window of Opportunity?

This essay is part of the Middle East-Asia Project (MAP) series on "Israel: The Future is Asia". The series investigates Israel's expanding relations with Asia -- the forces propelling and impeding their growth, the progress made in their development, and their as yet unrealized potential. See more ...

These are momentous times for Indonesia: A new president has just been elected and will assume office in October. Based on his record as Governor of Jakarta, the president elect, Joko Widodo, appears to have some of the characteristics of a radical, just what is needed to effect the major changes necessary to bring Indonesia as the second “I” into the community of BRIC countries (i.e., Brazil, Russia, India, and China). For this and other reasons, the relationship between Israel and Indonesia is worthy of attention. Yet, Israel and Indonesia are two nations whose relations―due to political circumstances―have yet to fulfill their enormous potential.


Although they are located thousands of miles apart and have very different cultures and experiences, Israel and Indonesia have some interesting similarities. Both countries obtained their independence from colonial powers in wars that defined their destinies in the immediate post-World War II period (Indonesia in 1945, Israel in 1948). Both countries are essentially secular but have one dominant religion, Islam and Judaism, respectively, which have a decisive influence on the fabric of life. Although religious minorities nominally enjoy equal rights in both countries, in practice they experience  varying degrees of discrimination at the individual and the institutional level. Last not least, both countries are nations composed of people of many different origins united by a common language.

Political Constraints

On the diplomatic front, the bilateral relationship has not substantially changed since its inception in 2005.[1] Not even the participation of Indonesian troops in the United Nations (UN) contingent in South Lebanon (beginning in 2006) has resulted in a deepening of the country’s diplomatic engagement with Israel. Attempts to establish an Indonesian diplomatic representation in Ramallah in 2012, accredited to the Palestinian Authority while maintaining undeclared relations with Israel, did not come to fruition.

As long as Israel does not resolve its dispute with the Palestinians, that conflict will throw a pall over any relationship with Indonesia. The fact that Indonesia’s economic elite is predominantly Christian and/or ethnic Chinese is a mitigating factor, making cooperation with the Jewish state ostensibly less problematic but at the same time potentially more complex. Muslims, who constitute the overwhelming majority, are mostly moderate but are not infrequently influenced by Middle East-based incitement. Those who are more radical may well look at any close cooperation between Indonesian Christians and Jews (few Indonesians differentiate between Jews and Israelis) as some kind of conspiracy directed against them. In fact, the influence of radical Islamic groups on the political scene in Indonesia continues to hold considerable power over the public agenda as it relates to Israel, which makes diplomatic engagement with the Jewish state difficult and politically costly but not impossible.

That Indonesia should support the Palestinians is a given among the Muslim political leadership and enjoys huge public support. This, in itself, is not an insurmountable obstacle to deeper Israel-Indonesia relations. However, overcoming this impediment requires the understanding on the part of Indonesia that access to Palestine and thus the channel through which support to the Palestinians can be provided lies mainly through Israel. Thus, supporting the Palestinians in concrete ways and improving official relations with Israel go hand in hand. The latter requires not just bold political leadership but a broad domestic political consensus.

Indeed, the need for, and the difficulty of achieving consensus―a central tenet of Indonesian culture, particularly in Javanese society, which dominates Indonesian politics―is itself an obstacle to the further development of Israel-Indonesia relations. And there is no such consensus regarding relations with Israel. In fact,  everything associated with Israel requires careful management.

These political constraints have had a significant adverse impact on the development of business ties. The absence of a regulated relationship has  compounded the difficulty inherent in conducting the commercial, legal and logistical aspects of potential cooperative ventures. At present, Israeli incorporated companies cannot even obtain certification to conduct business in Indonesia because the state of Israel is not officially recognized. A single-entry business visa for Israeli citizens costs almost $800, which is another way of saying “don’t come.” This situation puts Indonesia, which ostensibly wants foreign investment, at a serious disadvantage when compared to other Asian countries. Myanmar, Thailand, Vietnam, Taiwan, Cambodia, Laos, and the Philippines, not to mention China and Indiaall of which have open, dynamic and mutually beneficial relations with Israel.

Progress and Potential

Though political factors have stunted the development of Israel-Indonesia relations, they have by no means foreclosed all channels of cooperation. On the contrary, bilateral trade, for example, is estimated to be in the range of $400-500 million. Nearly 80% of  this trade is Indonesian exports, mostly commodities. Indonesian imports from Israel consist mainly of high-tech products, a large portion of which are acquired  through third countries (e.g., Singapore, Europe, and Jordan).[2]

Notwithstanding these accomplishments, there are several areas where enhanced cooperation could pay significant dividends, most notably the agricultural sector, in which Israel, having developed many applicable technologies, is a world leader. Since almost 40% of the Indonesian workforce is employed in the agricultural sector, a serious revamping of that sector using Israeli know-how and technology would have a considerable impact on the economy overall and income inequality in particular, one that could be achieved with limited investment.

Indonesia currently imports an estimated $5 billion worth of agricultural products per year.[3] If it can move beyond the impediments described above, there is no reason Indonesia cannot become self-sufficient in agricultural produce and even become an exporting country. Whereas the transfer of Israeli technology and know-how could help effect that change, it must be accompanied by government action, both through official encouragement of private ventures and through agricultural extension programs that would involve the rural farming community.

In Indonesia, traditional, subsistence agriculture is inefficient and a huge burden on the economy. A farmer whose family has been growing rice for generations is unlikely to grow anything else unless there is a strong incentive and both financial and technical assistance. Specifically for rice farmers, Israeli technology now makes it possible to grow rice without flooding the fields, using trickle irrigation. This development makes it possible for farmers to grow cash crops in the off-season and thus supplement their income materially. This technology, if implemented widely in Indonesia would have a huge impact on poverty alleviation.

Another area in need of improvement is the Indonesian dairy industry, which is seriously undersized, supplying barely 30% of the country’s needs. Israel has the world’s most developed dairy technologies and stands ready to help develop the Indonesian market.

Israel can be of assistance in the medical field as well, both in technology and methodology. Access to quality medical care in Indonesia is available, if at all, only to the well-to-do and only at very few hospitals, mainly in Jakarta. Given the dispersion of the Indonesian population and the country’s lack of doctors, utilizing tele-medicine (remotely operated medical sensors) could be one of the most cost-effective approaches to providing basic medical care to a large segment of the population. Israel is a world leader in this field. By employing tele-medicine, doctors at distant medical centers can examine the readouts or images received over the Internet and decide which patient needs hospitalization or further testing. In this way, diagnostic services can even be provided by doctors outside the country without any major difficulty. Israel and Indonesia could also collaborate in the health sector, given that Israel has one of the world’s most advanced health insurance systems.

Indonesia's energy sector could also use a boost. Electricity production capacity is far below the level needed for the country to keep pace with rising domestic demand. At the same time, the development of natural energy and fuel resources has fallen short of  meeting the country’s growing needs. Indonesia, once a major oil exporter, now consumes as much oil as it produces. Natural gas is only slowly becoming widely available due to the associated logistical challenges. Israel has technologies that can make abundant stranded gas resources accessible immediately, thus increasing the stock of gas available and providing energy in rural area using alternative, environmentally friendly energy production methods. In fact, Israel has earned international recognition as the world leader in recycling and anti-pollution technology, with 19 (!) companies listed in the top 100 most promising cleantech firms.

The sector that probably has the greatest influence on the development of Indonesia is education. Yet, the quality of instruction is woefully low in many parts of Indonesia. As a consequence, the educational system is unable to generate the number of qualified teachers, engineers and doctors that the country desperately needs. Partnering with Israel, which has developed effective distance learning methods and software, could be .

All these technological possibilities are supported by Israel’s IT sector, which is already well established in the Indonesian market, mainly in mobile communications, sometimes through non-Israeli proxy companies. Satellite communications and Wi-Fi technologies are also already on the Indonesian market, and the local companies are keenly aware of Israel’s capabilities.

Finally, bilateral tourism has great untapped potential. Presently, only about 20,000 Indonesians visit Israel every year, usually on Christian pilgrimages. The number of Israelis visiting Indonesia is much smaller―as tourists Israeli citizens can only enter the country on group visas. If the many tens of thousands of Indonesians who go on Ummrah or the Hajj would add Jerusalem to their itinerary, the impact at many levels would be considerable.


The huge potential for cooperation based on the complementary nature of the two economies and Israeli predilection to take risk and initiative (incidentally, the book Start-up Nation will be published in the Indonesian language soon),[4] has been seriously stymied by political considerations.

What, then, can be doneif anythingto unlock the potential for a more  productive Israel-Indonesia relationship? An important initial step would be for Indonesia to improve commercial access for Israeli companies through a more liberal visa policy and the appointment of a single assigned Indonesian embassy (e.g., Singapore, Bangkok or Amman) where such firms could have their documents vetted in order to make cooperative ventures with Indonesian counterparts legally feasible. This initiative could be followed by a more liberal policy accepting Israeli tourists on individual visas, maybe in the beginning restricted to Bali. At a later stage, Indonesia could propose the adoption of the “Taiwan solution” (i.e., the establishment of commercial but not diplomatic representation), possibly as an enticement to prod Israel to be more forthcoming in its dealings with the Palestinians to revive the peace process.

Thus, there are practical ways of improving bilateral relations, while minimizing public resentment in Indonesia. The timing of any such initiatives will be crucial. Developments in the Middle East, specifically the resumption of and progress in Israeli-Palestinian peace negotiations could create an opportunity to move the Israel-Indonesia relationship further along. Under these circumstances, Indonesia’s new president, recognizing the potential benefits of more extensive ties with Israel, would do well to seize it―and just might.


[1] For a short history of the bilateral relationship up to 2005, see Colin Rubenstein and Greg Barton, “Indonesia and Israel, a Relationship in Waiting,” Jewish Political Studies Review, 17:I-2 (Spring 2005).

[2] According to Israel’s Central Bureau of Statistics (CBS), bilateral trade in 2013 totaled a mere $126.3 million. However, this figure does not account for the sizable, and indeed disproportionate volume / value of trade conducted through third countries. For CBS official data, see Table 1 (June 2014),

[3] See, for example, R.J. Whitehead, “Indonesia to Become a Top 3 Wheat Importer in Next Five Years,” Food, March 4, 2014,; and Jake Lloyd-Smith, “Indonesians Buying Bread to Spur Wheat Imports Like Egypt’s,” Bloomberg, March 5, 2014,

[4] Dan Senor and Saul Singer, Start-Up Nation: The Story of Israel’s Economic Miracle (New York: Council on Foreign Relations, 2009).