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RI-Japan partnership too exclusive

The Jakarta Post, Wednesday, 23 March 2005

RI-Japan partnership to exclusive

Alexander C. Chandra, Jakarta

The Indonesian and Japanese governments have recently conducted two studies to discuss the feasibility of a Indonesia-Japan Economic Partnership Agreement (EPA). The first was conducted in Jakarta from Jan. 31 until Feb 1, while the second was held in Kuta, Bali, from March 1 to March 5.

Despite increased efforts on Indonesia’s side to make the participation of Indonesian interest groups as wide as possible, the government invited mostly business associations, a handful of academics, and a few representatives of civil society organizations, most of whom were pro-free market, free-trade actors, to take part in the studies.

In short, both studies failed include other civil-society organisations with differing views — they were far too exclusive and were reserved solely for pro-market actors.

We have learned from the past, that many regional economic initiatives were made to increase interaction among only large economic participants, big businesses, or large business associations from the states involved. From the making of the ASEAN Free Trade Agreement (AFTA) to the creation of the Asia-Pacific Economic Co-operation (APEC) group, only big businesses and pro-market academics were among the non-state representatives given access to the negotiation processes.

The same situation also applied in the recent studies to finalise the Indonesia-Japan EPA, where non-state participants consisted only of those from large business associations, such as the Indonesian Chamber of Commerce and Industry (KADIN), and trade liberalisation proponents from academic institutions, such as the Centre for Strategic and International Studies (CSIS) and the Institute for Social and Economic Research at the University of Indonesia (LPEM-UI).

The views expressed by these pro-market and trade liberalisation believers are of course necessary and while many of their concepts are arguable, many are also valid. However, Indonesia’s non-governmental organizations encompass not only liberal economists, but also those who are unwilling to surrender their land to the hands of foreign governments and multinational corporations.

As with most studies conducted on regional economic partnerships and co-operation initiatives in the past, the EPA studies are likely to produce a recommendation that encourages an EPA between the two nations to take place, especially in the absence of those sceptical about trade liberalisation.

There is no doubt that Japan has been one of Indonesia’s closest economic partners and aid-providers for decades. Indonesia, for example, has benefited from Japan’s Official Development Assistance (ODA) as the largest recipient of aid during the last few years, while Japan has been a key export market for Indonesian products.

Although a closer economic partnership will no doubt benefit both countries, it is imperative that negotiations between the two sides involve wider domestic representation from Indonesia and Japan. The Indonesian people were not consulted before; when the Megawati administration agreed to participate in the bilateral free trade agreement within the Framework Agreement on Comprehensive Economic Co-operation between ASEAN and China.

There were two key arguments stressed by neo-liberal Indonesian economists who took part in the EPA studies. The first was the likelihood the trade deal would boost Indonesian exports to Japan. This argument, however, was rather vague considering that the Japanese market has historically been one of the most difficult to penetrate by foreigners.

It would only be logical if this economic partnership deal would lead to a sudden boost of Indonesian exports to the Japanese market. However, it remains to be seen the extent to which Indonesian businesses will be able to sell to the Japanese.

The second argument for the EPA was the possibility that this trade deal could generate domestic reform, particularly on the Indonesian side. However, there has been little evidence to suggest that this country’s domestic policies were influenced by the previous free trade deals Indonesia has participated in.

Instead, domestic reforms were more often made possible as a result of domestic pressures exerted on the government. Would anyone care to explain why, for example, corruption is still prevalent in Indonesia despite the economic interference by international institutions like the World Bank, International Monetary Fund (IMF), and the World Trade Organisation (WTO)? In most cases, domestic reforms caused by pressure from international bodies were only made at the procedural level and were not necessarily implemented down at the grassroots.

In other words, Indonesia needs to commit to domestic reforms before committing to any free trade deals.

Another important issue that needs airing as the process towards the signing of the Indonesia-Japan EPA continues, is the dissemination of information regarding this economic partnership.

While the issue has involved non-governmental organizations, the detail of the meetings have not been disseminated among the general public. It is important that the government should not make the same mistake it made in the past — by giving the authority to make foreign trade policy to elite politicians and and trade-related government institutions. The public, along with NGOs, academics and business groups — both pro- and anti-free trade — should be well-informed about the development of the Indonesia-Japan EPA.

The writer is the research co-ordinator for the Institute for Global Justice (IGJ). He can be reached at [email protected]

 source: Jakarta Post