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Obstacles to an Indonesia-Taiwan economic partnership

posted 23-December-2012

Jakarta Post, Indonesia

Obstacles to an Indonesia-Taiwan economic partnership

By A.Ibrahim Almuttaqy, Jakarta | Opinion

19 December 2012

More often than not, whenever a Taiwanese official pays a visit to Jakarta, there is usually one question on his mind: “Dude […] where’s my FTA?”

Though the question is usually couched in more diplomatic and subtle language, the essence remains the same: With all the potential economic benefits an Indonesia-Taiwan free trade area (FTA) could bring to the table, why has one not been forthcoming?

If Singapore can sign an FTA with Taiwan, what’s stopping Indonesia? Indeed, a joint study by an Indonesian and Taiwanese think tank found that if tariff barriers between the two countries were removed, trade would increase by as much as US$334 million — a largely conservative figure given that non-tariff barriers are not taken into account.

A suggestion made when a Taiwanese delegation from the Prospect Foundation recently paid a visit to the Habibie Center may shed some clues to the questions above. Though the aforementioned joint study may have looked at hard economic data, focusing on facts and figures, it had perhaps omitted an examination of public perception among the average Indonesian or the political climate in Jakarta.

The discussion at the Habibie Center revealed these two factors to be the biggest present obstacles to an Indonesia-Taiwan FTA, thus attributing little to any notion that maintaining Jakarta-Beijing relations stood in the way.

In developing this point, three things can be said. First, in the past few years the Indonesian public has grown tired of the many economic partnerships Jakarta has entered with very little benefits seen as a result. Indeed, a popular feeling among Indonesians is that the costs of various FTAs far outweigh their benefits.

Second, on some level the Indonesian government has failed to communicate effectively with the people to explain the advantages. A case in point was the government’s handling of the ASEAN-China Free Trade Agreement (ACFTA) of 2002. Though the government had eight years to familiarize the people with the agreement, the ACFTA instead drew widespread public opposition at the 11th hour in 2010.

Third, political parties have tapped into this depth of public feeling as a useful stick with which to beat the government. In other words, FTAs have been hijacked as a tool to win political points. To illustrate, although the ACFTA was signed by Megawati Soekarnoputri during her presidency, it was her Indonesian Democratic Party of Struggle (PDI-P) that would later become one of the most vocal critics of the ACFTA against President Susilo Bambang Yudhoyono’s administration.

Taking all the above into account, it is highly unlikely despite the economic sense it makes that Indonesia will commit itself to any new FTAs anytime soon. The public is tired, the government needs to work on its communication skills and political parties are sharpening their knives.

As was mentioned at the Habibie Center, it was simply not a good time to sign an FTA, and with presidential and legislative elections around the corner in 2014, an Indonesia-Taiwan FTA is all the more unlikely.

So, where does this leave our Taiwanese friends?

A little patience, trust and understanding of the nuances shaping Indonesian politics and its domestic environment would a go a long way. As such, greater Track 1.5 and Track two activities, like the third Taiwan-Indonesia dialogue co-organized by the Habibie Center earlier this year, should be further encouraged. In this way, an Indonesia-Taiwan economic partnership can one day be realized, bringing economic prosperity to the people of Indonesia and Taiwan.

The writer is the ASEAN studies program officer at the Habibie Center in Jakarta, which co-organized the third Taiwan-Indonesia Dialogue in September 2012.

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