Expand Markets and Increase Sources of Investment

KOMPAS/LAKSANA AGUNG SAPUTRA

President Joko Widodo (second right) and First Lady Iriana Joko Widodo (third right), accompanied by Foreign Minister Retno L.P. Marsudi (right), visit Gamcheon Culture Village on Sunday (24/11/2019) in Busan, South Korea. The President will attend the ASEAN-South Korea Summit and hold bilateral meetings with South Korean President Moon Jae-in and the leading Korean businessmen during his visit to the “ginseng country”.

BUSAN, KOMPAS — Indonesia and South Korea have completed negotiations on the Indonesia-South Korea Comprehensive Economic Partnership Agreement (Indonesia-Korea CEPA). The agreement will not only diversify the markets of Indonesian goods but also increase sources of investment for Indonesia.

Foreign Minister Retno LP Marsudi said the documents on the economic and trade agreement would be signed in Busan, South Korea, on Monday. President Joko “Jokowi” Widodo and South Korean President Moon Jae-in will witness the signing of the agreement.

Negotiations on the Indonesia-South Korea CEPA comprise six working groups, which respectively discuss trade in goods, trade in services, investment, the provision of the Rules of Origin, Customs Procedures and Trade Facilitation (ROOCPTF), cooperation and capacity building, as well as legal and institutional issues.

Through the CEPA, Indonesia will get better market access for industrial, fishery and agricultural products in the South Korean market. In return, Indonesia will provide market access for industrial raw materials and facilitate South Korean investment.

With the completion of the CEPA negotiations, Jakarta hopes bilateral relations with Seoul will improve. South Korea is one of Indonesia\'s important economic partners. South Korea invested a total of US$7.5 billion in 7,607 projects in Indonesia from 2012-2016.

KOMPAS/LAKSANA AGUNG SAPUTRA

President Joko Widodo (sixth left, in gray suit) and First Lady Iriana Joko Widodo (fifth left), accompanied by Foreign Minister Retno L.P. Marsudi (second left) and Indonesian Ambassador to South Korea Umar Hadi (far left), stroll through Gamcheon Culture Village on Sunday (24/11/2019) in Busan, South Korea. The tour took place the day before the President attends the ASEAN-South Korea Summit and several bilateral events on 25-26 November 2019 in Busan.

In bilateral trade, the value of Indonesia\'s exports to South Korea reached $9.54 billion, while imports were worth $9.08 billion last year. Indonesia enjoyed a surplus of US $ 460 million from trade with South Korea. "The types of commodities traded are complementary. Indonesia\'s challenge is to increase exports of manufactured products to South Korea, "said Indonesian Ambassador to South Korea Umar Hadi.

The vice chairman of the Indonesian Chamber of Commerce and Industry (Kadin) for International Relations, Shinta Kamdani, said the Indonesian-South Korean CEPA could further diversify sources of investment and markets for Indonesian goods, which is important amid the weakening global economy and trade war.

Through the CEPA, Indonesia can overcome the lack of special rights in trade. Other countries that have signed similar agreements with South Korea have already enjoyed such special rights.

Seoul can also become an investor and partner in domestic economic reform. Changes to accelerate the domestic economy are needed so that Indonesia will be able to compete globally. Changes are also needed so that Indonesia can become part of the global supply chain.

Economic reform

Shinta said the signing of the CEPA with Korea should be coupled with the government’s efforts in coping with problems hampering industrialization and economic reform. Both are needed to maximize the benefits of the CEPA. "Don\'t just focus on the completion of the trade agreements," she said.

That requires more than just import tariffs or standard policies on goods and services, or other trade technicality.

Entrepreneurs, said Shinta, expected the government to do other things to optimize the benefits of trade agreements. The agreement is expected to truly open market access. That requires more than just import tariffs or standard policies on goods and services, or other trade technicality.

To achieve optimum results, Indonesia also needs to remove export barriers. The control is needed so that there are no violations of the trade agreement and the standardization of the import documents required in taking the advantages of the special rights stipulated in the trade agreements.

It also requires control over unfair competition, such as the use of subsidies or prices of export products being lower than those in the domestic market. The entrepreneurs also need understanding on how to benefit from the trade agreements, overcome export barriers in other countries, to fulfill export requirements in other countries. Businesspeople also need information about the commodities they can export. They also need information on how to utilize trade facilities under the bilateral trade agreement and assistance from Indonesian representatives abroad.

While investors who want to benefit from the trade agreements should not be given additional obstacles, it is important to ensure the trade agreement will be beneficial for the Indonesian economy.

Using own products to meet the industrial needs is no longer part of today’s economic pattern.

Shinta also mentioned that entrepreneurs should not be prohibited from importing the raw materials they need or to be forced to absorb uncompetitive local products. Using own products to meet the industrial needs is no longer part of today’s economic pattern.

Competitiveness and efficiency are more important in the economy of the current era. The government should, therefore, be encouraged to focus on revitalizing unproductive sectors. In addition, the government should ensure that these sectors receive funding and technology to be efficient and competitive. Only, with that way, Indonesia will truly benefit from the trade agreement. (RAZ)