Boosting Economic Diplomacy
Muliaman Hadad
Export and investment. These two things continue to be echoed by the President of the Republic of Indonesia frequently, especially in efforts to overcome the problem of the deficit in the trade and services accounts.
These two things are also the main core of the implementation of economic diplomacy, which in recent years has become one of the main focuses of Indonesia\'s foreign policy.
Economic diplomacy is now in place in response to globalization and the dynamics of global geo-economic and geopolitical changes. Since the Cold War passed, the world no longer takes up arms, but uses economic policy as an instrument of "war". Vietnam continues to boost free trade agreements (FTAs) with a number of countries and economic blocs; Thailand and Malaysia through international cooperation agency (ICA) activities have penetrated a number of regions and economic blocs; China with its Belt and Road Initiative (BRI); Japan uses public private partnerships (PPPs) to expand its business as well as many other examples.
In its development, economic diplomacy continues to expand, involving not only the government (state), but also non-government actors, such as the private sector, financial institutions, NGOs and civil society.
There are no specific concepts that can describe economic diplomacy even though several journals have tried to explain the phenomenon. Saner and Yiu (2003) define economic diplomacy related to economic policy issues, with the existence of economic diplomats who monitor and report on foreign economic policy as a consideration for domestic economic policy.
Moons, Selwyn and Van Bergeijk (2009) add that economic diplomacy is the use of the entire economic spectrum in a country to achieve national interests, including policies related to exports, imports, investment, loans, aid, free markets and other factors. Bayne and Woolcock (2016) describe economic diplomacy as a way to achieve national economic goals through international relations.
One of the benchmarks that is often used is the economic benefits resulting from successful political diplomacy or vice versa.
Economic diplomacy is, of course, a new concept for Indonesia. Diplomacy is a political concept and an art of negotiation in the national interest that has been implemented by the Foreign Ministry. For example, formulating economic policies that cannot be separated from the political situation, economic diplomacy is closely related to the political diplomacy that has been going on for years. Even, lately the two words have become difficult to separate and certainly should not be seen separately. One of the benchmarks that is often used is the economic benefits resulting from successful political diplomacy or vice versa.
Since President Joko Widodo took office in 2014, efforts have been carried out to make economic diplomacy the main axis of Indonesia\'s foreign policy, in addition to the protection of Indonesian citizens. Until now, the report on economic diplomacy has shown a positive direction. In 2018, Indonesia managed to reap Rp 6.75 trillion at the Indonesia-Africa Forum event.
In Latin America and Eastern Europe, Indonesia has also received a positive response, especially the process of introducing the Indonesian market to these countries. The Indonesia-Chile FTA has been agreed, the Indonesia-EFTA (European Free Trade Association) Comprehensive Economic Partnership Agreement (IE-CEPA) has also been signed, while various trade agreements are being discussed, including with the European Union (EU).
Homework
Overall, the implementation of Indonesia\'s economic diplomacy still leaves homework that needs to be executed effectively. Opportunities for economic cooperation and market development in a number of countries have not yet been maximally utilized, while the exploration of various commodities that can move Indonesia\'s economic balance sheet has not been wholly worked out. Economic diplomacy is still not well described. There are at least two things that need to be a focus to spur economic diplomacy in Indonesia, namely integrated policies and capacity building of the stakeholders. Economic diplomacy should no longer be seen as the exclusive property of the Foreign Ministry, as was the original diplomacy. A holistic approach and the involvement of all stakeholders are needed.
Economic diplomacy should not be done sporadically, but should be centered with objectives and targets on a national scale.
First, the integration of policies in the implementation of economic diplomacy must be carried out at both national and international levels. Indonesia must design an economic diplomacy that is associated and aligned, starting from the planning, implementation, up to the supervision and evaluation with a more detailed indicator of success. Economic diplomacy should not be done sporadically, but should be centered with objectives and targets on a national scale.
If we can settle on a clear program, including the type of commodities, countries of destination, targets for sales values, deadlines and the forum to be used, the relevant ministries and institutions can go forward hand-in-hand with the same focus. These conditions should also be applied to the supervision and evaluation process so that improvement can continue to be made with the same benchmarks and without necessarily blaming each other.
Another obstacle being faced is the lack of data sources and think tanks for the implementation of economic diplomacy. The data being used is still based on the interests of certain ministries/institutions so that it cannot be referred to nationally. Existing think thanks are still scattered in various institutions with discussion of different substances. Good data and information will determine the success of consultation in negotiating trade agreements and market penetration by exporters, including penetration into non-traditional markets.
The integrated policy indeed requires an established coordination, something that is still work in progress for this republic. In the implementation of economic diplomacy, Indonesia must have a coordinator who can not only spearhead the international scene, but also mobilize potential and resources at the national level.
Even though exports and investments are closely related to the Trade Ministry, the Industry Ministry, and the Investment Coordinating Board (BKPM), the implementation of economic diplomacy is still reserved by the Foreign Ministry. Therefore, it is time for the Foreign Ministry to find effective forms of cooperation or coordination, from the beginning of the process up to the monitoring stage. It is possible even to change the nomenclature of the Foreign Ministry and the formation of special working groups among ministries.
Second, stakeholders related to economic diplomacy must also increase their capacity. Coordination in capacity building is also badly needed, both for the purposes of improving the quality of negotiations, as well as database and analysis development. The present diplomats must be equipped with knowledge about trade, industry and investment, in addition to sharpening their expertise in negotiations. The current diplomacy must be more transparent, with the disclosure of clearer and more accurate information, and be accessible by the public so that it can be utilized by all stakeholders.
For example, the implementation of economic diplomacy can be carried out, among other ways, through increasing the competitiveness of domestic production and opening the widest market access for national industries to international markets. Moreover, economic diplomacy can also help investment, not only inviting in foreign investment, but also vice versa, promoting domestic entrepreneurs for investment abroad. The concept of nation branding can also be encouraged to promote Indonesia through a "complete package" of trade, tourism and investment (TTI), as adopted by Korea with the Korean Global concept.
The steps taken by Malaysia and Thailand, through the establishment of ICAs, can possibly be imitated. These steps are becoming increasingly important in supporting a holistic approach, especially creating markets for national products, particularly in developing countries. Thus, the stakeholders should properly share roles to realize the same vision and mission.
The role of SOEs and the private financial sector is also important in assisting exporters who need support in the areas of funding, insurance and capital, especially in the effort to internationalize SMEs, which are also an important part of economic diplomacy.
Effective economic diplomacy should also involve the legislature, state-owned enterprises, the private sector and NGOs. The stereotype of the term diplomacy, which is closely related to foreign politics, often does not consider the role of the legislature, the private sector or NGOs. The legislature is needed to authorize policies related to economic diplomacy, NGOs to voice public opinion and the private sector, which currently has a lot of support for trade and investment transactions, consists of stakeholders who must be considered. The role of SOEs and the private financial sector is also important in assisting exporters who need support in the areas of funding, insurance and capital, especially in the effort to internationalize SMEs, which are also an important part of economic diplomacy.
The involvement of all stakeholders must be seen as a continuous process, not incidental. Non-governmental parties are still seen as supporting actors, who are only involved if the government does not have the capacity anymore. In its process economic diplomacy is not just about trade shows or the signing of FTAs, but an overall program and action taken to improve the national economy. Each party involved can play its respective role without fighting over rations.
In the plenary Cabinet meeting on July 8 the President of the Republic of Indonesia again highlighted the issue of exports and investment and hoped ministers could provide a profitable solution. Not only domestically, the President also firmly gave directions to increase the value of trade and investment, as the main item on the agenda for all representatives of the Republic of Indonesia, presented at the Working Meeting of the Heads of the Republic of Indonesia Representatives (Raker Keppri) in February 2018. Economic diplomacy has become our task and a shared responsibility domestically or through any Indonesian representative office.
Borrowing the term of former Indonesian foreign minister Hasan Wirajuda, economic diplomacy is also an inter-mestic (domestic international) concept. In other words, all parties must coordinate in synergy with its implementation in order to achieve the goal of achieving export and investment value.
Muliaman Hadad, Indonesian Ambassador to the Swiss Confederation and Principality of Liechtenstein
