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Indonesia-Japan economic partnership agreement goes into effect tomorrow

Antara News, Indonesia

Indonesia-Japan economic partnership agreement goes into effect tomorrow

By Eliswan Azly

1 July 2008

Jakarta (ANTARA News) - Tomorrow will be a historic day for Indonesia and Japan as the two countries sign an economic partnership agreement (EPA) which will go into effect on July 1, 2008.

Relations between Indonesia and Japan reached a new high with the two nations inking an array of strategic partnerships last year, covering the environment, health care and a new free-trade deal that will potentially open the door for investment.

Japanese Ambassador to Indonesia Kojiro Shiojiri on Monday said the Japan-Indonesia Economic Partnership Agreement could be a model for world economic cooperation, as the two countries have been building comprehensive and close relations and improved a mutually beneficial economic scheme.

Prime Minister Shinzo Abe and President Susilo Bambang Yudhoyono signed the terms of implementation of the Economic Partnership Agreement before Abe`s resignation last September, which was aimed at further promoting trade and investment between the two countries by reducing tariff barriers and improving cooperation in capacity building.

EPA, Indonesia`s first bilateral free-trade deal, will exempt Indonesian products from 90 percent of Japan`s 9,275 import duties, amounting to 99 percent of its export value. The agreement is also aimed at fostering the service sector and the export of workers to Japan.

Japan will be exempted from 93 percent of Indonesia`s 11,163 import duties, 92 percent of its export value, while being ensured of a steady supply of energy and raw materials from Indonesia.

Indonesia could still be obstructed by non-tariff barriers in its trade with Japan in spite of the EPA. That is why the EPA also includes cooperation in capacity building to ensure the quality of Indonesian products entering the Japanese market.

The strategic advantages for Indonesia is that our products will receive international recognition, because Japan is a developed country demanding high quality standards.

"I am sure EPA can serve as an example to world economic cooperation as the two countries have been building and promoting diplomatic relations for over 50 years," Shiojiri said.

Japan and Indonesia recently signed the EPA aimed at strengthening bilateral and regional economic relations not only as contained in the Free Trade Agreement but also a wide-ranging cooperation in investment and movements of individuals.

Indonesia and Japan are important economic partners in East Asia. As far as Indonesia was concerned, Japan is a trade partner and biggest foreign investor. To Japan, Indonesia is a major energy supplier and a basis for its manufacturing sector.

As a major trading partner, Indonesia had been exporting commodities to Japan worth 23.6 billion US dollars, while Japanese imports from Indonesia was valued at 6.5 billion US dollars. The total value of the two countries` bilateral trade in 2007 reached 30.1 billion US dollars and the trade value had increased in the past four years.

More than 1,000 Japanese companies are operating in Indonesia absorbing 400,000 workers.

"The most important aspect of the EPA is partnership. Under the partnership scheme and serious business activities, we are convinced that what has already been agreed on in EPA will be able to run smoothly and to achieve significant success," he said.

In the meantime, Industry Minister Fahmi Idris said the EPA is basically a liberalization of trade, and if that`s the case, it will surely benefit Japan more.

According to him, Japan might get the upperhand in the deal with that country`s high-tech products still in high demand in Indonesia, and set to enjoy even lower duties. By contrast, Indonesia`s main agricultural and timber products would continue to face non-tariff and market-access barriers in Japan in the form of strict quality standards. He therefore urged Japan to invest more in Indonesia`s manufacturing industry within the framework of the EPA.

"Let`s just say this is to balance things up against the loses we might have suffered under this agreement," he said, adding that there was a need for a joint statement to be issued so as to ensure its fairness.

Since July last year, Indonesia and Japan have been working toward the signing of the EPA, a comprehensive bilateral economic agreement that will include not only liberalization of trade in goods and services, but also cooperation in the fields of investment, competition policies and the movement of people.

The two Asian countries held their sixth round of EPA talks before, aiming to overcome the remaining differences.

With regard to the EPA, Trade Minister Mari Pangestu previously said that most of the differences between the two sides were about the quality standards of products, rather than tariffs. She had therefore asked Japan to provide technical capacity-building help to Indonesia to raise its product quality standards.