CMEA Darmin Nasution Lead Coodinatiang Meeting at His office (07/11) - Photo by CMEA Office

JAKARTA (TheInsiderStories) – Indonesian Government will ratify seven bilateral trade agreement in the ASEAN, ASEAN+, and one Free Trade Agreement (FTA). The ratification will be stipulated through a Presidential Regulation.

Those are First Protocol to Amend the AANZFTA Agreement, Agreement on Trade in Services under the ASEAN-India FTA (AITISA), Third Protocol to Amend the Agreement on Trade in Goods under ASEAN-Korea FTA (AKFTA), Protocol to Amend the Framework Agreement under ASEAN-China FTA (ACFTA), ASEAN Agreement on Medical Device Directive (AMDD), Protocol to Implement the 9th ASEAN Framework Agreement on Services (AFAS-9), and Protocol to Amend Indonesia-Pakistan PTA (IP-PTA).

Previously, Minister of Trade Enggartiasto Lukita said Indonesia is hoping to seal at least 13 bilateral and regional trade agreements, followed by a comprehensive economic partnership agreement (CEPA) with several countries. The move aims to improve and widen market access for Indonesia’s exports.

He acknowledged that Indonesia lagged behind Vietnam and the Philippines in terms of market access. While enjoying a commodity boom, Indonesia neglected downstream industry while the other countries worked hard to attract investors and create free trade access.

According to Coordinating Minister for Economic Affairs Darmin Nasution after lead the meeting yesterday (07/11), the government has submitted the ratify agreement to parliament since March 2018.

Refers to Law Number 7 Year 2014 Article 84 Paragraph 4 which regulates about ratification of international trade agreement, if the parliament does not make a decision within a maximum of 60 working days on during the session, the government can decide whether or not the approval the Indonesian House is necessary.

He continued, there are several potential disadvantages if Indonesia does not ratify the seven trade agreement. For an example, in the AANZFTA agreement, the 11 parties will reject the Certificate of Origin of Indonesian products and can not take advantage of tariff preferences.

“Second, since the AANZFTA is in effect, Indonesia is the main beneficiary,” he said.

He elaborated more, one country using AANZFTA facilities is Australia. Last year Indonesian export connected to AANZFTA reached 73.6 percent or US$1.76 billion of total exports to Australia. Last year total exports Indonesia to Australia worth of $2.35 billion.

Then in the AITISA agreement, Nasution explained, Indonesia could not access the market of professionals in the construction, travel, communication, other business services (high and middle management), and recreational services that were the hallmarks of Indonesia, India.

“Then Indonesia can be disputed because it does not apply the principle of transparency because it does not reduce transaction costs. It also cannot provide certainty of the HS code committed as a result of negotiations (HS 2007 to HS 2012), if it does not ratify the AKFTA agreement,” he added.

In addition, it is also potentially disputed by other ASEAN members who have commercial interests. While for the AMDD agreement, if Indonesia does not ratify it, then medical products are difficult marketed in ASEAN and the world because AMDD regulates standards, technical rules and conformity procedures assessments that harmonize the international standards.

Other than that, Indonesia can be said not to support Presidential Instruction Number 6 Year 2016 concerning Industrial Development Pharmacy and Medical Devices. The potential loss of the export market to ASEAN is worth $853 million for 2017.

Furthermore there is three potential losses if we do not ratify the ACFTA agreement. Indonesia can be disputed because it does not facilitate the provision of SKA, procedures customs and trade facilitation as agreed. The, the country does not enjoy the addition of five service sub-sector commitments by China (medical and
dental, engineering, travel agency  and tour operator, nature and landscape protection, also securities).

In term of investment, will reducing incentives for Chinese investors to invest in Indonesia because the country does not
simplify application procedures and investment approval, and cannot participate in ACFTA investment promotion program.

Finally, if this country does not ratify IP-PTA, there will be at least five potential losses like Pakistan will “terminate” PTA so that Indonesia will lose a market share of CPO worth $1.46
billion (2017) in Pakistan.

The CPO market share will be captured by Malaysia, which is currently upgrading its bilateral FTA (not just PTA) with Pakistan.
And, inhibiting joint plans for up-grade IP-PTA to IP-Trade in Goods Agreement.

Nasution said, in various approval (PTA, THREE, FTA or CEPA) scenarios, Pakistan is unlikely to enjoy the trade balance surplus with Indonesia. Total trade with Pakistan is $2.63 billion in 2017, which is exports of $2.39 billion and imports of $241.1 million with a surplus for Indonesia of $2.15 billion.

US$1: Rp14,800 

Email: linda.silaen@theinsiderstories@gmail.com

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The Insider Stories Founder Linda Silaen has a solid, proven history, established over more than a decade as a journalist with a leading internasional news organization, of being the first with the biggest economic news stories in Indonesia. Specializing in corporate news, Linda is also a veteran of some of the biggest macroeconomic and general news stories as Indonesia rapidly transforms into a major market economy. One of the founders of the original blog from which this company developed, Linda’s knowledge of investors’ information communications and data us developed from unrivaled networking skills that make her a well-known name among CEOs, bankers, government officials and private equity investors both in Indonesia and other countries.

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