Indonesian Private Sectors View on IA-CEPA Shinta Widjaja Kamdani - - PowerPoint PPT Presentation

Indonesian Private Sectors View on IA-CEPA

Shinta Widjaja Kamdani

Vice-Chairwoman for International Relations, KADIN Indonesia & APINDO

Importance of IA-CEPA

IA-CEPA has been in the works for 7 years; In the meantime, economic and business relationship between the two countries is still underweight:

0. 200,000. 400,000. 600,000. 800,000. 2010 2011 2012 2013 2014 2015 2016 in USD 000

Australian FDI to Indonesia

20 40 60 80 100 120 2012 2013 2014 2015 2016 in USD billion

Trade between Australia & Indonesia

Total Trade Oil & Gas Trade Non-oil & Gas Trade

Importance of IA-CEPA

Growing urbanization, growing working-age population and growing economy; Indonesia needs Australia’s expertise to develop its services sector; Indonesia is a large market for Australian soft commodities; Indonesia is a highly potential export market for Australian services sectors;

Indonesia Australia

Way Forward: Private Sectors Need Post IA-CEPA

IA-CEPA is Indonesia’s 2nd bilateral trade agreement after IJEPA (2008). IA-CEPA will be a new type of agreement. 5 major elements:

• 1. Complete liberalization list;
• 2. An institutionalized mechanism for greater engagement of

business communities;

• 3. Policy adjustments to smoothen the structural shifts;
• 4. Clear action plans to raise IA-CEPA utilization rate.

Way Forward: Private Sectors Need Post IA-CEPA

• 1. Complete liberalization list, especially in trade in goods, trade

in services, and investment

 A high level of knowledge on IA-CEPA is needed to be able to

maximize its benefits;

 Business strategies formulation toward the IA-CEPA

implementation;

 Production capacity improvement;  Market access and cheaper input goods.

Way Forward: Private Sectors Need Post IA-CEPA

• 2. An institutionalized mechanism for greater engagement

between the Australian and Indonesian business communities

 IA-CEPA should foster investments between 2 countries.  How to encourage business matching between the two

countries?

 The case of Singapore and India:

 IE Singapore and SKP Business Consulting collaborate to

promote business matching;

 The fees for the service can be offset with financial support

from IE Singapore.

Way Forward: Private Sectors Need Post IA-CEPA

• 3. Policy adjustments for the government to smoothen the

structural shifts caused by IA-CEPA

 “Lock-in effect” of an FTA.  Different structural responses between developed and

developing countries.

 FTA creates winners and losers;  Need policies to reforms weak industries, not to protect them.

 Adjustment policies at both the firm and worker level are

required to mitigate adverse effects of structural changes caused by FTAs.

Way Forward: Private Sectors Need Post IA-CEPA

• 3. Policy adjustments by the government to smoothen the

structural shifts caused by IA-CEPA (EXAMPLE) TAA in in th the e USA

 90% of its funds to US workers;  TAA program for workers:

training and income support payments, job search and relocation allowances, as well as

• ther reemployment services.

TAA in in Sou

• uth Korea

ea

 90% of TAA funds are allocated

to manufacturers and firms;

 Loans, investments, and job

placement support are given out to small and medium-sized firms and manufacturers.

Way Forward: Private Sectors Need Post IA-CEPA

• 4. Clear action plans to raise IA-CEPA utilization rate by private

sectors

 Outcome of an FTA: utilization rates by private sectors.  ERIA and LPEM FEUI (2013) survey of ASEAN+1 FTAs

utilization in Indonesia:

 Users: medium and large and joint venture firms;  Government is the sole provider of FTA-related information;  Information is incomplete and segmented.

 Low utilization rates bring negative consequence.

Way Forward: Private Sectors Need Post IA-CEPA

• 4. Clear action plans to raise IA-CEPA utilization rate by private

sectors

 FTA portal

 Indonesia must maximize the growing digital literacy and establish an

integrated FTA portal;

 DFAT has a very good FTA portal that IA-CEPA can adopted.

 Government agency(ies) that monitor the IA-CEPA implementation

 South Korea has 3 agencies to guide FTA utilization: FTAPPAA, National

FTA Utilization Center (FTAUC), and local (regional) FTA Assistance Centers.

Way Forward: Private Sectors Need Post IA-CEPA

• 5. Continue the standard mapping project to the second phase.

 First phase:

 General mapping of Indonesian and Australian standards;  Not yet touch on technical regulation.

 Second phase:

 Need to select specific sector (pilot project) for further

assessment;

 Aim for mutual recognition;  Increase buy-in from private sectors.

Final Words..

An FTA is negotiated by government, but utilized by private sectors. The government must shift its strategy regarding FTA :

• Avoid misunderstanding of automatic gains from FTA implementation;
• Focus more on the technical details.

Must avoid the ”FTA fatigue” perception.

Final Words..

Indonesia and Australia are neighbors forever. Now is the time to grow together!

“… no country is more important to Australia than

• Indonesia. If

If we fail ail to

• get th

this is rela lationship ip rig right, an and nurtu ture an and develop it, it, the the whole web eb of

• f ou
• ur for
• reign

rela elati tions is is in incomplete.”

Pau aul l Kea eatin ing, former Aus ustra ralia ian Prim rime e Minis inister er (19 (1994 94)

Thank You!