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Japan agrees to RI proposal to review partnership deal

The Jakarta Post | January 28 2015

Japan agrees to RI proposal to review partnership deal

Linda Yulisman

In a much anticipated move, Japan has given a nod to Indonesia’s proposal to review an economic partnership agreement to further step up bilateral economic relations.

Trade Minister Rachmat Gobel said Tuesday that his office would consult with related ministries on the issue and set up a team to carry out the assessment.

The review was expected to take place this year although a specific time frame had yet to be determined. “We must have a grand strategy with regard to what we want to do [with Japan]. We need to coordinate with the Industry Ministry,” he told reporters after opening the ministry’s annual work meeting.

Indonesia’s request to review the Indonesia-Japan Economic Partnership Agreement (IJ-EPA), which has been implemented since 2008, was proposed last week during the trade minister’s visit to Japan, where he met with Japanese Prime Minister Shinzo Abe and his counterpart, Economic, Trade and Industry (METI) Minister Yoichi Miyazawa.

Indonesia has demanded several times such a review as it claims it benefits less than expected from the deal, but no follow up has been made up to present.

Indonesia has yet to reap maximum benefits from the IJ-EPA due to, among others, lack of product diversification, according to research by the Centre for Strategic and International Studies (CSIS) in 2013.

Goods that failed to obtain higher market access despite the partnership agreement were textiles, footwear, processed food, pulp and paper as well as fishery products, according to a survey conducted by CSIS in 2013. Import duties have been cut but are still lower than other kinds of products such as iron and steel, automotive items, electronics and chemicals enjoyed mostly by Japanese companies.

Indonesia’s imports from Japan have also outperformed its exports, with imports climbing 17.81 percent to US$19.28 billion in 2013 from 2009, in contrast with exports, which rose only 9.3 percent to $27.09 billion, data from the Trade Ministry shows.

Rachmat said sectors subject to review might include agriculture, fisheries and manufacturing industry, while investment would also be among topics raised in it.

Japan has been a long-time major foreign investor in Southeast Asia’s biggest economy, with direct investment rising 30 percent on average within the past five years. Realized investment in 2013 nearly doubled that of 2012, primarily spurred by massive spending in the automotive sector, settled at $4.71 billion, according to statistics from the Investment Coordinating Board (BKPM).

Economists have pointed out that in the past; Indonesia has failed to deliver strong positions in free-trade agreement negotiations, resulting in it gaining less from its trading partners, therefore reviews must be at the top of its agenda.

Rachmat also said he had secured some commitments from some Japanese industrial firms to either increase investment or boost exports. Japan’s automotive giant Toyota, for instance, aimed to bring its component suppliers to Indonesia to support local manufacturing, he further said. Other firms, automobile maker Honda and printer maker Epson also expressed their commitments to boosting the export of transmissions and printers, respectively.

 source: Jakarta Post