If the UK’s exit from the EU creates an economic apocalypse in London, Jakarta may serve as the other side of the fence, where the grass is greener.
For expats in Indonesia who are not British or European, the news of the Brexit was likely just a headline that flashed across the laptop screen — one you may not have taken time to fully appreciate. Some of us may not even be fully aware of the potential economic apocalypse the UK is facing as a result of boorish political rhetoric; words and ideas that resulted in an ill-informed national vote that yielded dire consequences. For those who’ve been scuba diving in the Gilis for the past two months, or riding riverboats in Kalimantan, here’s a quick recap.
June 23 was a historic day for the European Union (EU). Britain’s second attempt to exit the politico-economic cooperation of 28 member countries finally succeeded after 17 million UK voters opted to leave. Experts say most Brits did not fully understand the economic implications of such a vote. Arguments can be made that the vote to leave the EU was largely due to political zealotry brought about by former conservative Prime Minister David Cameron and former London mayor Boris Johnson. The vote in favour of a “British exit” has brought global uncertainty about the future of Britain’s economy.
The two-year exit process has not officially started yet. David Cameron stepped down as prime minister after the harsh reality of Brexit set in, realizing he likely did permanent damage to the global economy. Parliament member and conservative party leader Theresa May has since stepped in to fill his shoes.
The most immediate and obvious economic impact of the vote was the British pound’s nearly overnight devaluation. At the time of this writing, the pound is worth roughly US$1.32 — the lowest it has been in decades. After it was announced that Britain would leave the EU, big companies began moving their money out of the country, which in turn lead to skyrocketing inflation rates.
According to the Centre of Economic Performance at the London School of Economics, the UK has greatly benefited from favourable EU market access and low trade tariffs over the years. With this in mind, 48 percent of the nation’s exports go to Europe. While these are just some of the things that will be dramatically impacted by Brexit, they serve as important economic puzzle pieces to the nation’s wellbeing as a whole.
For immigrants and migrant workers living in Britain, lives truly do hang in the balance. As a result of the Brexit, the status of all European foreigners in the country will be called into question. Big businesses in London will surely suffer in many ways too.
While left-wing politicians and the media have done their best to paint visions of a dystopian British future, the Brexit fiasco has also washed up on foreign shores. British expats in Indonesia have begun wondering what the vote really means for them.
Indonesia and the EU have recently negotiated a free trade agreement that represents an aggregate market size of 750 million people. Indonesia is one of the world’s largest emerging markets, and experts say it needs to be prepared for the possibility of renegotiating bilateral trade with the UK.
On a more upbeat note, Indonesia’s vice president Jusuf Kalla suggests Brexit will not have a significant impact on the local economy, saying the country’s exports are unlikely to see a decline at all. When compared to other countries like Japan and Singapore, exports from Indonesia to the UK are still considerably small. That said, the long-term impacts of Brexit on Indonesia’s economy will continue to remain uncertain.
For British expats living in the archipelago, many think not much will really change. Adrian Li is a British citizen living in Jakarta. He is the founder and managing partner of the local venture capital firm Convergence Ventures, a company that invests in technology startups in the archipelago. He sits on the board of directors at regional Internet companies like Qraved, Female Daily Network, and Paktor. Prior to entering the tech world, Li also served as an investment banking analyst for JP Morgan the UK.
“Overall, Britain’s exit from the European Union will impact the relationship between the UK and the EU far more than it will Indonesia,” says Li in an interview with Indonesia Expat. “The UK is just one component of the relationship between all other European countries. It is actually quite complicated because the UK has never fully participated in all of the components of the EU. For example, it is not in the Eurozone and it uses the pound as its currency. Britain agrees on some terms put forth by the EU, but not others.”
From a purely economic standpoint, Li believes Indonesia can sidestep most potential risks posed by Brexit. Fundamentally speaking, the UK will still want to conduct as much foreign trade as it possibly can, while simultaneously looking to tighten up its borders and control immigration.
In the short term, Indonesia will have to be mindful when negotiating any further trade agreements with the EU. It will need to specify whether the UK be included in the terms of said agreements, as Brexit will indeed take multiple years to execute. “The UK in and of itself is already the largest economic market in the European Union,” explains Li. “So, in its own right, it is large enough to carry out serious negotiations with other countries.”
But this is not necessarily a good thing. Li says that Brexit could potentially encourage other countries to shy away from international free trade.
“If we believe that countries are better off being more open in working together, promoting free trade, and so on, then Brexit is certainly a departure from that,” says Li. Although he admits he cannot speak for all Brits in Indonesia, he adds, “All things considered, we would have preferred not to have Britain depart from the EU, not to have turmoil in the markets, and not to have a lot of anti-immigration sentiments.”
Li’s perspective aligns with that of Jusuf Kalla, who believes in the long term, the actual economic impact of Brexit on Indonesia will not be as severe as the immediate aftermath of the vote suggests.
As a British citizen, Li admits that getting a visa just to go to Europe would be a pain. He adds, “Brexit itself has no direct impact of any sort on me personally, other than how valuable and flexible the UK’s passport will be in the future. In the near term, we in Indonesia should not expect any harmful effects.”
Depending on negotiations between the EU and UK, the pound’s current devaluation might represent a viable buying opportunity, says Li, assuming traders believe forex rates will eventually return to normal.
“Although I am not an economist or a trader, I do think that the immediate market concerns are exaggerated,” he says. “The market movements were caused less by what would happen because of Brexit, but actually more by uncertainty created by the vote.”
“In terms of opportunity, we cannot be sure to what extent the relationship will be between the UK and Indonesia,” says Li. “Indonesia’s growing need for investments in infrastructure might benefit from this, along with exports to the UK.”
If Brexit is the catalyst for a future of economic doom and gloom in London, it’s possible that British expats in Jakarta might start to see more of their mates arriving in batik shirts, sniffing out fresh opportunities.