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A. Introduction
A.1. Indonesia-EU Trade and Investment: There’s large room
for further enhancement
G
eneral position on bilateral trade in goods: Indonesia is the net-exporter 4 billion USD, while the EU is net-importer 9 billion USD.
Indonesia’s export to EU:
Main export: palm oil, rubber, mineral resources, TPT, footwear Natural resource-based and labor- intensive industry.
In 2012, EU is ranked as the fourth largest source of import share: 7.4, and the third largest export
destination for Indonesia’s products share: 9.5. Moreover, EU is the 4th largest export destination for Indonesia’s animal andor vegetable oils products palm oil included.
EU’s export and FDI to Indonesia:
Main export: machinery, transport, electrical, pulp and paper, chemical, agriculture-processed products
high-value addedindustrial products. EU’s export share on pulp and paper products to Indonesia is the 3rd largest in the world and the 1st largest in ASEAN.
In general, Indonesia is not among the top major trading partner of EU 0.21 of total EU export,
0.38 of total EU import. However, Indonesia’s market has currently gained increasing attractiveness as the EU exports to Indonesia, from 2000 to 2012, has grown dramatically at 162.2 percent with
annual growth more than 10 percent.
Indonesia accounts only a minor share of total EU FDI to the world 0.5 and to ASEAN countries
13.5, in term of FDI stock.
ADVOCACY
Paper
“In Facing Indonesia-European Union Comprehensive Economic Partnership Agreement:
Perspective from Indonesia’s Business Sector”
Asosiasi Pengusaha Indonesia APINDO
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The fact that Indonesia-EU trade is somewhat complementary will provide an essential foundation for a mutually beneficial CEPA. The Indonesia-EU CEPA proposal will, therefore, excavate greater trade and
investment opportunity between the two countries.
A.2. Indonesia-EU CEPA: The basic features
T
he Indonesia-EU CEPA is essentially a more comprehensive and ambitious FTA with a triangular architecture: market access, capacity building and facilitation of trade and investment.
Market Access:
Tariff elimination for 95 of tariff lines, covering at least 95 of trade value 7 years, flexibility up
to 10 years
NTM reduction through regulatory convergence and provision of trade facilitation
Trade in services liberalization: broad sectoral coverage and cover all modes of supply
Investment negotiation: cover liberalisation and protection of investment, both for services and non-services sectors
Liberalization in public procurement market covering Procurement of goods, services and public works,
as well as procurement by central and local authorities, state controlled entities and monopolies, especially those operating in the utilities sectors
Cooperation and Capacity Building CCB: covering CCB on market access and investment Trade and Investment Facilitation: promoting convergence and co-ordination and cooperation in the
customs and trade facilitation field, using relevant international standards as appropriate
A.3.
The Signiicances and Strategic Consideration on Indonesia-EU CEPA
B
ased on the Vision Group report 2011, the proposed Indonesia-EU CEPA is predicted to have significant benefit, such as:
An additional 0.1 of Indonesia’s GDP growth in the short-run
An additional 1.3 in Indonesia’s GDP in the long-run
Around USD 2 billion increase in trade balance
5 production increase in light industries
1.5 increase in overall wages
The foreseeable impact of employment creation and poverty reduction
Aside from its potential benefit, there are several strategic points worth to be further considered:
The gap on the development level
The benefit of CEPA will be more likely bias towards the EU
side
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It will be much easier for EU to penetrate into Indonesia’s market than for Indonesia to enter
EU market, as EU producersoperators are highly equipped with better technical and financial capacity, thus will find no difficulty in complying with low-level Indonesia’s standard and technical
requirement. In contrast, a significant adjustment cost is more likely borne to Indonesia’s private sectors, as they have to adapt with such a stringent compliance system in EU.
Toward single production base under the AEC
the cost of holding back is way greater than the
cost of participation into the EU CEPA
When the ASEAN Economic Community AEC is fully realized, the ASEAN countries will be integrated economically as a single production base, which make doing business intra-regionally
seems like domestics, because of minimal economic barriers. If EU want to satisfy market demands coming from other ASEAN countries which is not yet having CEPA, exporting under zero tariff
scheme in AEC is a more preferable solution for them, instead of be bothered by establishing a plant where domestic demand is existed. In this case, Indonesia will lose investment and trade
enhancement momentum.
Viewing all the barriers and challenges embedded in Indonesia-EU trade and investment relation
more as negotiating tools, instead of impeding factors
By not moving forward with this CEPA agreement, the trade and investment impediments
between the two countries will still remain and no economic enhancement will be made. Yet, under Indonesia-EU CEPA, there’s opportunity to negotiate the existing barriers and turning it
into mutually beneficial economic deal that will enhance both economic conditions. For example: Indonesia might accept some of the EU proposal in exchange for lowering down the technical
barriers and domestic protection in EU as well as capacity building for the private sectors and relevant stakeholders.
The Indonesia’s private sector argues that joining the EU CEPA might provide net-benefit at the margin. However in moving forward with the Indonesia-EU CEPA negotiation, Indonesia has to take the most
precautious way by ensuring that:
The CEPA will not severely hurt domestic industry like the past experience with other FTA, e.g.
ACFTA.
There is a fair market access opening, especially for Indonesia’s exporter wishing to penetrate into
EU market.
The chapter, program, and the spirit of CEPA itself reflect, as much as possible, the fact that EU and
Indonesia differ significantly on its development level.
This study attempts to further identify the key issues on the proposed Indonesia-EU CEPA and serves as a recommendation for the government on how to best deal with the Indonesia-EU CEPA negotiation,
particularly from the perspective of private sectors. In doing so, this paper looks into several relevant aspects, such as tariff, non-tariff measures, trade in services, investment, trade defence, agriculture subsidy,
public procurement, IPR, and competition law. It mostly contains of general recommendation on the best position the Indonesian government should take in the negotiation process of Indonesia-EU CEPA.
It provides suggestion not only on how liberal Indonesia should be opened up to EU, but also in what aspects Indonesia might push the EU’s trade policy to be more accommodative and less restrictive in
the pursuit of mutually beneficial Indonesia-EU CEPA.
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B. Indonesia-EU CEPA: Key Issues and
Kategori