Will normalization extend well beyond the Middle East to Southeast Asia? Although reports that Indonesia President Prabowo Subianto plans visiting Israel have been denied, there is again a focus on the economic relations that already exist between the two countries and the potential that closer ties would bring.
Indonesia's economy is struggling to provide employment, the country's industry is weakening and its dependence on foreign investment is increasing. While the government in Jakarta is looking for new avenues for reconstruction, Israel - even if unofficially - has long been there: in power plants, cybersecurity systems, water technologies and clandestine trade routes via addresses in Singapore, Hong Kong and Thailand.
Indirect, stable and growing trade
According to the UN Comtrade database, which compiles official trade data between countries, Israel exported goods worth $49.56 million to Indonesia in 2024. The bulk of exports included electronic equipment, machinery and boilers, medicines and pharmaceutical products, as well as medical and optical equipment.
In the same year, Israel imported goods worth about $54 million from Indonesia, a significant decline from more than $200 million in 2023, when exports of textile products and palm oil increased sharply.
Indonesian exports to Israel mainly include leather shoes, with an average value of about $39 million, along with palm oils and plant products worth $23-44 million annually.
According to Trading Economics, an international platform that compiles official macroeconomic data from government and international sources, the total volume of trade between the countries is growing by 5% annually and in recent years, at an average annual rate of about 3.7%, despite the lack of diplomatic relations or signed trade agreements.
Most transactions are carried out through intermediaries and regional banks in Singapore and Hong Kong, which allow ongoing trade while maintaining formal separation between the parties.
Prof. Arie Krampf, head of the Philosophy, Political Science and Economics program at Tel Aviv-Yaffo Academic College, suggests seeing these economic developments as part of a broader trend. In general, he says, "The statements and signals from Indonesia should be placed against the backdrop of a broad geo-economic process, a transition from an era of globalization to an era of regional division and economic blocs. Any country that remains without a patron is likely to find itself vulnerable."
Full relations through mediation
Behind the numbers is real economic activity. For example, in February 2025, a geothermal energy plant by Ormat Technologies, an Israeli company that owns a factory in Yavne, went into operation on Java, Indonesia’s most populous island, and its industrial center. The plant produces electricity from natural heat with a capacity of 35 megawatts, and Ormat owns 49% of the plant alongside local partner Medco Power Indonesia.
This is one of the largest renewable energy projects in the country, included in Indonesia's national plan to increase green energy production to 7.2 gigawatts by 2035.
Beyond the energy sector, indirect collaborations are also taking place in the fields of precision agriculture, smart water management, digital health and climate technologies, according to several Israeli sources. Most of these collaborations are carried out through regional partners or international investment funds, which allow for the promotion of cooperation, even without direct political ties.
A report published last year by Amnesty International, which operates in over 150 countries and is considered one of the world's leading bodies for monitoring human rights, revealed that Israeli companies, including NSO Group and Candiru, sold cyberattack software to Indonesia through international intermediaries. According to the report, the sales were intended for intelligence and law enforcement purposes, but no quantitative data was provided on their scale.
Prof. Krampf says these developments are not accidental. "Indonesia has operated for years from an anti-colonial and separatist perspective, which also dictated an anti-Western and anti-Israeli line," he explains, "but the leadership in Jakarta sees the changes taking place in the Middle East after the Abraham Accords and the US's attempts to reshape the regional order, and therefore it needs to redefine its strategic position."
Due to the industrial crisis in Indonesia, the opportunity for cooperation with Israel is growing. While Indonesia is trying to regain its industrial advantage, Israel excels in areas where the Indonesian economy is experiencing a growing need - including automation, robotics, AI for industry and energy innovation. These technologies could help Indonesian factories improve efficiency, save energy and renew supply chains that have been damaged in recent years.
Growth without jobs
Alongside the potential inherent in cooperation, the Indonesian economy is currently undergoing profound structural changes. The country, the third largest in Asia, with a population of nearly 300 million, is experiencing a continuous decline in the status of the manufacturing sector, the growth engine that characterized the 1990s and 2000s.
According to the Financial Times, factories that once thrived, such as the giant Sritex textile factory that supplied clothes to giant chains such as Uniqlo and Walmart, have been closing down one after another. Sritex laid off more than 10,000 workers last March after its financial collapse, and other international companies such as Yamaha and Nike have reduced their activities or left the country.
In addition, according to data from the Central Bureau of Statistics of Indonesia, more than half of the jobs lost in the first half of 2025 were in manufacturing industries. At the same time, government investment is being channeled into capital-intensive projects such as nickel mining and palm oil processing, which generate high profits but create almost no new jobs.
Manufacturing’s contribution to GDP has fallen from about 32% to just 19%, and there has been a sharp decline in car sales, private consumption and consumer credit. The World Bank has revised Indonesia’s growth forecast for 2025 downwards to 4.7%, and the proportion of workers in casual jobs has risen to 59%.
Economists warn that pouring capital into large projects instead of factories that employ many workers is harming Indonesia’s ability to provide quality employment and maintain stability and social cohesion. Former Finance Minister Chetib Basri has described the situation as "jobless growth."
In addition, Gareth Leather, a senior economist at Capital Economics, added that Asian countries that have developed successfully have done so thanks to a competitive manufacturing sector, and that Indonesia is moving away from this model.
As of today, Indonesia maintains its official position that it will not normalize relations with Israel until a political solution to the Israeli-Palestinian conflict is reached. However, mutual interests are building beneath the surface, and in a world where economic ties tend to precede political declarations, it may be trade that will pave the way for future normalization.
Prof. Krampf concludes, "Declaring normalization with Israel is likely to provoke domestic opposition in Indonesia, and yet, the very fact that the issue is on the agenda shows that the moves between the parties are already in high gear."
Published by Globes, Israel business news - en.globes.co.il - on October 16, 2025.
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