Negotiations on Trade in Services: Opportunities and Challenges - - PowerPoint PPT Presentation
Overview of Global Trends in Services Economy and Indonesias Negotiations on Trade in Services: Opportunities and Challenges Jakarta, 22 November 2016 Prepared by Herliza Aman, Director, Directorate of Trade in Services Negotiations
Jakarta, 22 November 2016 Prepared by Herliza Aman, Director, Directorate of Trade in Services Negotiations
DIRECTORATE GENERAL OF INTERNATIONAL TRADE NEGOTIATION MINISTRY OF TRADE
I.
Importance of trade in services in economic development for Indonesia
Indonesia
commitments made so far
negotiations: the way forward
negotiations: opportunities and challenges
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(2000: 44.4%; 2005: 48%; 2010: 52.9%; 2013: 55.1%; and 2014: 51%).
agricultural and manufacturing sectors: 1.16% - 4.71. (Bank Indonesia, 2014)
The Driving Force
million USD, had an increase of 5.6%, compared to the previous
The Growth of Services Sector Income
there were 45.4 million (45.4%) workers who were employed in the service sector in 2013 there were 56.4 million (50.9% of labour force). (National Labour Force Survey, 2013)
Job Creation
are the intermediate inputs (agriculture: 5,4%; manufacture: 11.9%; & service itself: 20.9%)
(1.1 to 2.46). (AIPEG, 2015)
Economy Efficiency & Productivity
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SERVICES The Production Side of GDP Increasing the Value Added The expenditure side of GDP ECONOMIC GROWTH Export of Services The Increase of Non-Oil Exports
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SERVICES SECTORS IN THE MID-TERM NATIONAL DEVELOPMENT PLAN (2015-2019): DEVELOPMENT STRATEGY IN SUPPORTING FOREIGN TRADE POLICY
The increasing quantity and quality of priority services sectors:
Transportation services, tourism services and construction services
and economic productivity: logistic services, distribution services and financial services
Enhancing coordination among respective Ministries in developing and implementing services sectors roadmap Participation in services global value chain in order to enhance the competitiveness of services sectors Utilizing the services commitments in international trade agreements Increasing the quality
related to services sectors, as value add
Increasing the quality
statistics to provide an accurate data and information
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Exports & Imports of Indonesia’s Services (Cross-border Trade) Source: Bank Indonesia
Top 3 exports of services :
accommodation, food and beverages, entertainment, domestic transportation in countries visited
Merchandise trade and other trade related services,
Miscellaneous business, professional and technical services
services: carriage or transportation of goods and related to export and import of goods Top 3 imports of services :
and travel related services
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support job creation.
the current stage of economic globalization, driven by new technological
products, is increasingly carried out wherever the necessary skills and materials are available at competitive cost and quality.
companies to increase the value of their products.
and logistics, legal and communications services, are the links that forge global value chains.
services value added accounting for almost a third of manufacturing exports in developed countries and 26% in developing economies.
economies, but the capacity of such countries to benefit from GVCs should not be taken for granted.
efficiency, are vitally important to allow services to be the enablers of global value chains
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Every manufacturing product from pre, in process, and post can involve 12 services sectors:
and related engineering
cultural and sporting activities
elsewhere Source: Business Week Online. May 16, 2005 10
Source: APEC PSU Study: Services, Manufacturing and Productivity, 2015
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Priority Sectors Goods Input Direct and Indirect Services Inputs Other Input Cost Angkutan laut*) 47,68% 23,31% 29,01% Automotive 48 % 12.5 % 41 % Electronic 52.47 % 19.03 % 28.5 % Textile 44.39 % 16.31 % 39.3 % Chemicals 59.44 % 11.46 % 29.1 % Food Processing 53.15 % 15.35 % 31.5 % Bamboo, wood, and rattan 39.34 % 18.46 % 42.2 % Rubber and plastic 58.48 % 14.12 % 27.4 %
Source: Based on Table 2. Total Transaction based on producer prices (BPS 2009)
Services are needed for goods to be high value and competitive
*) Based on Table 2. Total Transaction based on producer prices (BPS 2005)
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Source: Based on Table 2. Total Transaction based on producer prices (BPS 2009)
Total 12.5 %
Top 5 Direct Services suppliers
Non-Goods and Services Components : 41 %
Indirect services 1.5 % Indirect services in automotive sector 1.3 % Financial services 5.2 % Wholesale and retail 1.17 % Real Estate and Business Services 0.1 % Road Transportation 0.047% Water Transportation
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Indonesia’s shares of services for automotive sector is only 12.5 % Share of services in the automotive sector in the global industry is 3 times higher than that in Indonesia
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Regulated in GATS (General Agreement
Ratified by UU No. 7 / 1994.
Legally Binding
What are regulated in GATS:
MFN, Transparency, Domestic Regulation, subsidy, etc;
(MFN), MNP, Air transport services, Financial Services, Telecommunication Services
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AFAS 1 (1997) AFAS 2 (1998) AFAS 3 (2001) AFAS 4 (2004) AFAS 5 (2006) AFAS 6 (2007) AFAS 7 (2009) AFAS 8 (2010) AFAS 09 (2013) AFAS 10 (2017)
Commitments have been negotiated gradually in the form of packets (Protocol to Implement AFAS) up to the year of 2017 (1st Packet – 10th Packet). ASEAN Integration Schedule on the Services Sector:
Equity Participation (FEP) 70%, and 80 sub-sectors commited
sub-sectors commited
128 sub-sectors
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Signed in November 2012 in Cambodia To fascilitate labor movement related to trade and investment activities among members
Stipulating the rights and obligations associated with the movement of labor Applying a transparent and efficient procedures in the application of immigration formalities (temporary residence permit) Keeping the border integration of member countries and protecting domestic employment and permanent work force in the territories of member
The Commitments are the compilation
air transport services) and of the AANZ FTA.
The category of MNP commitments are Business Visitors, Contractual Service Supplier (CSS); Intra-Corporate Transferees (ICT) for Director, Manager and Specialist
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China Korea Japan AANZ India
Package negotiations
has been concluded.
committed 33 sub-sectors.
package of ACFTA was ratified.
sectoral dedicated annex in the ACFTA TIS text.
Agreement on Trade in Services signed in November 2007 in Singapore.
72 services sub-sectors committed. Most of market access commitments are in mode 3 with FEP 49%.
ratified the agreement through Presidential Decree No. 56
2010.
in the framework of AJCEP has reached an agreement in November 2015 with the completion of legal scrubbing of the text on trade in services chapter
ASEAN’s proposed annex related to MFN Treatment
Telecommunication, Japan accepted a transitional period of five years after the Indonesia new Telecommunications Law was enacted.
trade in services negotiation, Chapter TIS and Investment will be a stand alone agreement.
Indonesia's commitments
sub-sectors requested by Japan), while Japan committed 187 subsectors.
entered the period of the agreement review, including commitments in Chapter TIS, and review of specific commitments in services trade, ESM article and MFN article.
negotiations on Economic Cooperation agenda, ASEAN Qualification Reference Framework (AQRF) issue had been discussed since 2012 and successfully endorsed in 2015.
entered the 4th phase focused on the process
the ASEAN member countries to AQRF, called National Qualification
Economic Ministers at the ASEAN Summit on 13 November 2014 in Nay Pyi Taw, Myanmar.
committed 8 services sectors with a total of 62 sub-sectors, with FEP on mode 3 is around 35% - 51%.
committed 7 services sectors with a total of 44 services sub- sectors, with FEP on mode 3 is around 49% - 51%.
REGIONAL: ASEAN PLUS ONE
Based on Article 151 on Indonesia-Japan Economic Partnership Agreement (IJEPA) regarding General Review (GR), IJEPA will be reviewed within five (5) years after entry into force (EIF) particularly to review the implementation of the Agreement (2008-2013).
The Japanese government has formally approved the review requested by Indonesia (July 2013) through a Diplomatic Note dated on 9 December 2013.
One of the objectives of this review is to re-evaluate the implementation and operation of the EPA including the possibility to increase the commitment of the EPA and the improvement of the text
Through several preparatory meetings with related ministries in 2014, it was arranged that the position of Indonesia in GR for the services sector has not been directed to revise the text and commitments, bear in mind that IJEPA is the most opened agreement for Indonesia, hence the GR does not necessarily lead to progressive liberalization.
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RCEP
1) ASEAN +6 FTAs (Japan,
Australia, New Zealand, China, India, and South Korea)
2)
RCEP is established based
modern, competitive, and high quality cooperation, by promoting the principle of mutually beneficial economic cooperation
3) COMPREHENSIVE
(Goods, Services, Investment, trade facilitation, IPR)
4) Creating the economic region as a driver of the world economy 5) The negotiation
started in the early year of 2013 and targeted to be completed in 2017
6) WGTIS was instructed to
study on the utilization of the hybrid approach and scheduling methodology
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fulfill threshold in finalizing each package of commitments. In AFAS 10 negotiations, Indonesia is facing problems in fulfilling the obligations.
committed 70% FEP, it is uneasy to convince respective Ministries to make such commitments, although some sub sectors/sectors are not regulated or openly regulated (high level of FEP in DNI).
Agreement (ATISA), and at the time, it is being negotiated on the draft text including the modality.
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Indonesia- Korea CEPA
Indonesia- EFTA CEPA
Indonesia – Australia CEPA
requests-offers
Indonesia – EU CEPA
2009
its request for Mode 4 and EU gave the priorities for Indonesian labour with high qualifications and skills.
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for completion by 2017.
in its trade in services text, such automatic MFN, Future Liberalization, Transparency List as well as the possibility of a transition system of scheduling commitments from the positive list to the negative list.
about 100 subsectors. The parties are also expected to provide value adds commitments in their subsectors. Value adds are ratchet, transparency list, and the automatic granting MFN. Given the obligations
and create a transparency list.
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an autonomous liberalization (Perpres No. 44/2016, includes all sectors)
companies while trade in services has a broader perspective yet having natural persons/professionals in supplying services
influenced by unwillingness of line Ministries in making commitments as well as requesting for market access of services sectors.
domestic suppliers competitiveness as there will be participation of foreign suppliers in domestic market.
existing regulations (policy space/water)
conditions for services suppliers/foreign investors in supplying services
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well understood that the importance of services is captured in the inclusion of trade in services as one of development strategy in supporting foreign trade. The competitive services sectors would be an export potential. The next work would be on how to “downstream” the tasks into a real strategy.
there is major concern on the development of services sectors policy which are inconsistent, overlapping and contained high political interest. The regulations of services sectors sometimes did not consider the role of that sector to the other sectors (embodied and embedded services). The other concern would be lack of monitoring and enforcement of the regulations.
necessary, i.e: restrict competition more than necessary; increase the cost of services; limit consumers’ choice; and impede the improvement of productivity, competitiveness, and quality of services that can support the other sectors. Therefore, it is essential to have the policies in the services sectors that can ensure that the service industries are very efficient and investment-friendly.
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Way forward
A competitive services sector which supports the Indonesia economic growth Internal conditions:
suppliers that provides a good quality of services
suppliers that provide an efficient services
development needs a huge capital that can’t be fulfilled by domestic supplies External conditions:
as a response to the stagnancy of WTO/Doha negotiations
embodied in RTAs provision
Commerce, Competition, IPR
approach
market access limitation but also national treatment limitation
recommendations to create a conducive, certain and predictable business climate
negotiation strategy
services to economic growth, employment, and export performance
domestic services suppliers in international market
domestic services suppliers in providing a good quality and efficient services
global value chains
Current condition
sectors
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important trade partners in order to have greater market access and to avoid trade diversion
Note: Indonesia does not have many trade agreements, compared with other ASEAN Members
trade partners (i.e. IEUCEPA, TPP, RCEP), Indonesia must be ready to enter ambitious and comprehensive trade agreements
among
are giving substansial commitments (no/limited waters), new approaches (positive vs negative list), new features (separate chapters: financial services, telecommunication services, temporary MNP; Services related disciplines found in separate chapters: investment, government procurement, etc.)
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