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RI, EU eyeing ‘ambitious’ free trade agreement

Jakarta Post, Indonesia

RI, EU eyeing ‘ambitious’ free trade agreement

16 June 2011

By Erwida Maulia

Indonesia and the European Union (EU) have agreed to commence talks on an “ambitious” free trade agreement (FTA), as both parties seek to boost two-way trade and EU investments in Indonesia.

The FTA is part of a Comprehensive Economic Partnership Agreement (CEPA), which the Indonesia-EU Vision Group has recommended for the Indonesian and EU governments to soon start negotiations on.

The group was established in late 2009 by Indonesian President Susilo Bambang Yudhoyono and European Commission President Jose Manuel Baroso, and has been tasked with “invigorating the Indonesia-EU partnership“ in the trade and investment sectors.

“We recommend liberalization in the trade of goods and services, and in direct investments,” Vision Group co-chair Djisman Simanjuntak said during an event to hand over its recommendations to the Indonesian government here on Wednesday.

“We want an ambitious FTA. We call it ambitious because our recommendation to the government is that the FTA [will cover] 95 percent of tariff lines and 95 percent of trade values, covered over a period of nine years,” he added.

Indonesian Trade Minister Mari Elka Pangestu dubbed Wednesday’s event “the first of a series of consultations” expected to further enrich preparations ahead of the CEPA.

“We’ll be doing intensive consultations in the next few months; between business-to-business, government-to-government and business-to-government,” she said.

Djisman said he expected the negotiations to be completed within two years.

The EU has been exporting mainly machinery to Indonesia, while Indonesia has been providing processed resources such as palm oil and textiles to the EU, he said.

“Besides, we enjoy a trade surplus of US$7 billion with the EU, and hope that this new initiative will further increase the surplus.”

EU Ambassador to Indonesia Julian Wilson said the EU hoped negotiations on the CEPA would help create better a climate for EU companies to invest in the archipelago.

Wilson said there were “massive potentials” for further EU investments in Indonesia, and that so far only 1.4 percent of the EU’s foreign direct investments in Asia were going to Indonesia.

The chairman of the European Business Chamber of Commerce in Indonesia and a Vision Group member, Jakob Sorensen, especially expressed his interest in the newly-launched Indonesian government’s Master Plan for the Acceleration and Expansion of Indonesian Economic Growth (MP3EI) for 2011 to 2025.

“The Indonesian government has said they’ll probably be able to come up with about US$60 billion; so $100 billion is still needed for that program. I’ll be very happy if Europe would come up with 20 or 25 percent of that or more,” Sorensen said.

International trade observer from the University of Indonesia, Mahmud Syaltout, however, said there were a number of recommendations relating to the FTA that should be criticized.

“They all tend to be WTO-plus, which means they’re more liberal than the rules at the WTO,” he said.

— JP