Indonesian Trade Minister Enggartiasto Lukita held a bilateral meeting with his Indian counterpart Piyush Goyal on the sidelines of ASEAN Economic Ministers' Meeting in Bangkok, Thailand, Monday (09/9) - Photo: Trade Ministry

JAKARTA (TheInsiderStories) – Indonesia will intensify economic cooperation with India and New Zealand as Southeast Asia’s largest economy enters the Asian market. Indonesia asks India to reduce the refined, bleached, and deodorized palm oil (RBDPO) tariffs, as well as access to the goods trade market under the regional comprehensive economic partnership (RCEP) with New Zealand.

The move was conveyed by the Indonesian Trade Minister Enggartiasto Lukita in a bilateral meeting with his India and New Zealand counterparts at the ASEAN Economic Ministers Meeting in Bangkok, Thailand, on Monday (09/9).

“The tariff reduction is a commitment of Indonesia and India under the ASEAN-India Free Trade Agreement (AIFTA), agreed by the two countries last February,” Lukita said in a written statement.

The two countries, he went on, agreed to exchange import duties for Indonesia’ RBDPO (HS 1511.90.10, HS 1511.90.20 and HS 1511.90.90) and India’ raw sugar (HS 1701.13.00 and HS 1701.14.00).

“In accordance with commitments, Indonesia has lowered the tariff of Indian raw sugar and has been effective since July 8. Indonesia has also announced this to all parties involved in AIFTA on July 24,” the minister said, adding that until now India still had not fulfilled its commitment to reduce the tariffs on Indonesia’s RBDPO import duties.

According to Lukita, India was still considering because the country’ vegetable oil producers are suffered serious losses due to the drastic increase in RBDPO imports from Malaysia during January-June 2019. Currently, the Indian authorities are starting to investigate measures to safeguard trade so that the possibility of reducing the RBDPO import duty to Indonesia cannot be implemented soon.

“The condition is rather disappointing because the tariff reduction should be implemented immediately this year. It is now in September, meaning that the time for India to decide is not long,” he said, hoping that India could consider an option to reduce import duties on Indonesian products other than RBDPO.

For Indonesia, the RBDPO tariff reduction is believed to increase the competitiveness of RBDPO products, especially in order to compete with Malaysia in the Indian market, he said.

Commitment to reduce import duties that must be met by India is to provide tariffs on RBDPO import duties within the AIFTA framework as in the framework of the India-Malaysia Comprehensive Economic Cooperation Agreement (IMCECA). The applicable tariffs for IMCECA and AIFTA this year are 45 percent and 50 percent, respectively.

Meanwhile, Indonesia’s commitment to reduce the import duty on Indian raw sugar has been stated in Finance Minister Regulation, PMK No. 96 of 2019, concerning Changes in Tariff Value Based on AIFTA. According to Lukita, the tariff reduction for Indian raw sugar has a positive impact significant for India.

India now has the same competition opportunities as ASEAN, Australia and New Zealand in accessing the Indonesian market, which is a 5 percent market share.

In 2018, India is the 4th largest export destination and the 9th source of import for Indonesia. Last year, total trade between the two countries reached US$18.7 billion, with Indonesia’s exports to India at $13.7 billion and imports at $5.0 billion. Thus, Indonesia has a surplus of $8.7 billion.

Two of Indonesia’s main export products to India are coal $5.37 billion and palm oil and its derivatives $3.56 billion. Meanwhile, the main import products from India are cyclic hydrocarbons $356.7 million and motor vehicles $307.0 million.

On the same occasion, Indonesia also asked New Zealand’s response to the proposal to establish a bilateral Comprehensive Economic Partnership Agreement (CEPA). CEPA cooperation is expected to accelerate the completion of the RCEP negotiations because the issues that hinder New Zealand in RCEP can be resolved in CEPA.

“A negotiation can only be completed after all the countries in the negotiations reach an agreement. In this case, New Zealand is as important as other RCEP partner countries that are larger in the economy,” Lukita said.

Indonesia’s total trade with New Zealand reached $1.29 billion in 2018. Meanwhile, in the first half of 2019, total trade between the two countries reached $608.2 million with Indonesian exports of $221.7 million and imports of $386.4 million.

Economic cooperation is part of ASEAN’s commitment to enter Asian and world markets such as China, Hong Kong, Australia, New Zealand, Korea, and the United States. China has provided an additional grant of $7 million to increase the utilization of ACFTA.

Therefore, the completion of the RCEP negotiations will have a positive impact on increasing the value of trade and investment in the region. For this reason, ASEAN is targeting the conclusion of the RCEP negotiations to be completed by November 2019, Lukita said.

The strength of the RCEP negotiations is the world’s largest regional pact, so the conclusions will be significant for the world economy. RCEP, it said, covers 47.4 percent of the world’s population, 32.2 percent of the global economy, 29.1 percent of trade global, and 32.5 percent of global investment flows.

Written by Lexy Nantu, Email: lexy@theinsiderstories.com