RI-Japan trade deal waiting on new law
The Jakarta Post — 27 July 2006
RI-Japan trade deal waiting on new law
Rendi Akhmad Witular, The Jakarta Post, Jakarta
Trade Minister Mari Elka Pengestu says the government cannot sign a much-awaited Economic Partnership Agreement (EPA) with Japan by the year’s end unless the House of Representatives speeds up the passage of the new investment bill.
The bill is essential if the government wants to enter into bilateral deals without fear of violating the existing investment legislation, Mari told reporters Tuesday.
"We are still waiting for the investment bill to be passed. We just don’t want any bilateral agreements to run foul of the current Investment Law," she said.
The government submitted the investment bill to the House in mid-2005 for deliberation. However, little progress has been made to date with legislators apparently reluctant to accelerate its passage.
Delays have also been caused by disagreements among senior government officials over certain aspects of the bill, particularly proposals to reduce the licensing powers of the Investment Coordinating Board (BKPM).
Sources at the BKPM says that Mari wants the agency to come under her authority, with its tasks confined merely to promoting investment in Indonesia overseas. However, BKPM chairman Muhammad Lutfi wants otherwise.
Lutfi wants to maintain the powers of the BKPM, and appears uncomfortable at the prospect of having to play second fiddle to the minister.
The government had hoped that the investment bill would be passed this year so that it could come into effect in early 2007. The bill is essential to attracting more foreign investment, a prerequisite for higher economic growth.
Other factors slowing down progress on the EPA relate to protectionism, with both Indonesia and Japan holding out for the protection of various sectors, as well as disagreements on the products that will benefit from freer trade.
"We are still negotiating about which products can enter both countries and the level of protection that will be permitted. Japan has several sensitive areas related to agricultural," said Mari.
Indonesia and Japan agreed in July last year to begin working toward the signing of an EPA, a comprehensive bilateral economic agreement that would include not only the liberalization of trade in goods and services, but also cooperation in the fields of investment, competition policies and the movement of people.
Japan is Indonesia’s largest trading partner. Two-way trade amounted to US$24.9 billion last year, with an $11.1 billion surplus in Indonesia’s favor. Japan is also among Indonesia’s largest investors, with approved investment plans amounting to $1.68 billion last year
Mari said the EPA and a free trade agreement were basically the same in nature, but that the EPA would have greater scope than an FTA as it covered not only economic and trade issues, but also technical assistance.
Meanwhile, Vice President Jusuf Kalla said prior to a working meeting at the Trade Ministry that the government hoped to be able to clinch a deal with Japan on the proposed EPA by the end of this year.
He said there were still several issues that had to be discussed, especially as regards agriculture and industry, and raw materials from Indonesia.
While admitting that Indonesia was lagging behind compared to its peers in Southeast Asia in inking trade deals with developed countries, he said this was because the problems faced by Indonesia were more complicated and greater in scale.
"We will be surrounded by free trade deals. We must seek ways of competing with them, but at the same time we must also consider how to protect our agricultural sector, and small and medium enterprises," said Kalla.
