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RI, Japan agree to renegotiate economic partnership deals

The Jakarta Post | Wed, October 09 2013

RI, Japan agree to renegotiate economic partnership deals

Hendarsyah Tarmizi and Linda Yulisman

Indonesia and Japan have agreed to renegotiate their economic partnership agreements amid growing concern that the deals had failed to benefit both parties equally.

The decision to renegotiate the partnership agreements was reached during a bilateral meeting held on the sidelines of the APEC Summit, Coordinating Economic Minister Hatta Rajasa said in Nusa Dua, Bali on Tuesday.

Hatta said a joint economic cooperation team would first evaluate the implementation of the Indonesia-Japan Economic Partnership Agreement (IJ-EPA), which was signed five years ago in Tokyo, to boost investment and trade between the two countries. The results of the evaluation would become the basis for the renegotiations, he said.

The partnership agreement needed to be evaluated to ensure it’s relevance in the current turbulent economic environment.

Unlike Japan’s arrangements with other production bases in Southeast Asia, the deal with Indonesia not only touches on cooperation in investment but also on capacity building. Under the IJ-EPA, Indonesia agreed to cut tariffs by about 93 percent from the existing 11,163 tariff posts, and 58 percent will be eliminated immediately upon the implementation of the agreement.

A number of Indonesian economic analysts called for the review of the partnership arguing that it was more beneficial for Japanese companies. They said the capacity building and transfer of technology, as promised by Japan under the agreement, had not worked as expected.

Industry Minister MS Hidayat also shared the analysts’ concerns, saying the transfer of technology promised by Japan had failed to materialize as planned. “The fact that the growth rate exports to Japan lagged behind its imports also indicated that Indonesia received little benefit from the partnership agreement,” he said.

“All the cooperation agreements that failed to bring any benefit to us should be reviewed,” Hidayat said, adding that the IJ-EPA evaluation would be carried out this year.

Hatta said that during the bilateral meeting, the Indonesian government also explained the reasons behind the government’s plan to ban exports of unprocessed minerals: A decision Japan strongly opposed as it relied heavily on Indonesian nickel ore for its metal processing plants.

According to Hatta, Japanese officials understood the reasoning behind the export restriction policy, due to be implemented next year to strengthen Indonesia’s downstream mining industry.

“The Japanese have also expressed their willingness to take part in the construction of smelting plants,” he said.

Regarding Japanese Prime Minister Shinzo Abe’s comments about the delay to the Japanese funded power plant in Batang, Central Java, Hatta said that the government would expedite a resolution to the problem.

PT Bhimasena Power Indonesia, a consortium of several Japanese conglomerates — J-Power Electric Power Development Co. Ltd., Itochu Corporation — and local company PT Adaro Energy, priced the project at US$4 billion. The power plant would use Ultra Super Critical Generation Technology to reduce pollution.

The project has been delayed due to local protests and land acquisition issues. The consortium expects the construction work to begin in October 2014, two years behind the initial schedule. Hatta said that the government would ensure further delays were avoided. With almost 85 percent of land already acquired, he was hopeful the project would no longer be stalled by acquisition issues.

During separete bilateral meetins with other members of the economic grouping, the Indonesian government also promised to ease obstacles in hampering foreign investment in the country.

A number of leaders joining the summit such as Russian President Vladimir Putin also discussed the delay in the Russian company’s railway project in East Kalimantan. State-owned Russian Railway won a tender to build a $2.4 billion project in the province, but the project was delayed.

 source: Jakarta Post