The Netherlands and Indonesia: Is Dutch aid aimed at boosting flagging trade?

In 2013, Frans Timmermans, who was then the Dutch Foreign Minister, stated: “Indonesia is a growing economic power in the region. We have historical ties but our relationship has not developed by itself. We need to invest more in people-to-people contacts, political, economic and cultural ties.”

Looking at the trade data published on open data platform , it’s easy to see why such strategies are being implemented by this developed nation.

There are many countries - Indonesia included - that have relatively large economies but are below average when it comes to Dutch trade.

For example, Lithuania has a GDP that is approximately five per cent of the size of Indonesia’s, according to World Bank data, and yet over the last two decades, the Netherlands has done more trade with the smaller, European nation.

Netherlands trade with countries based on economy size

It might not seem that shocking that the Netherlands has done more trade with Lithuania - a country that is geographically nearby and the joined the European Union in 2004 - than Indonesia, despite the latter being a far greater economic powerhouse with many developing industries.

Most EU countries are the same, with trade boosted with their fellow European country due to the tariff-free access within the single market.

But Indonesia is a former Dutch colony - the largest constituent country of the Kingdom of the Netherlands until it declared independence in 1945. It is also the fourth largest economy in the world, with growing industries and many potential opportunities for investors.

Now an economic powerhouse, the Netherlands looks to be seeking to redress the trade balance with Indonesia.

Significance of trade with Netherlands compared to economy

The value of trade between the Netherlands and Indonesia over the last two decades is estimated to equal just 0.7 per cent of Indonesia’s GDP in 2016 - a miniscule amount when compared to other countries.

This compares to countries like Belgium, where the last two decades of trade has equated to 85.4 per cent of today’s Belgian economy. 18 other countries have seen two decades of Dutch trade valued at a fifth of their economy today.

When it comes to Ghana, the Netherlands’ trade over the last two decades is roughly 14.8 per cent the Ghanaian economy.  

And this is where its aid money could come in handy. The Netherlands has since 1997, which has been used to fund many projects such as developing disaster-stricken regions of the country such as Aceh and Nias after .

Such aid, Dutch politicians may hope, could help improve trade relations with this up-and-coming economy.

Dutch-Indonesian trade has a lot of potential. Over the last two decades, trade between the Netherlands and Indonesia in nuclear reactors, boilers, machinery and mechanical appliances alone valued €1bn. 

Equally, trade in both electrical machinery related products, and water transport such as ships and boats, were both worth around half a billion euros between 1997 and 2017. 

So while the Netherlands' trade with its ex-colony Indonesia really is a drop in the ocean compared to the size of the Asian giant's economy, there are areas in with trade is already valuable.

Such areas could be the areas of expansion that Timmermans said the Netherlands needs to "invest more" in, and could be a motivation for increased aid spending in the nation.

Tags:aid for trade trade aid netherlands indonesia

Share This Story: