Indonesian-EU Business Community Wants to Unleash Trade and Investment

BSD News, 23 October 2013

At the 4th EU-Indonesia Business Dialogue (EIBD), which took place in Jakarta today, Indonesian and
European business leaders called on the governments of Indonesia and the European Union to swiftly
start negotiations for a Comprehensive Economic Partnership Agreement (CEPA). The conference
themed "Adding Value to a Strategic Commercial Partnership: Moving towards a CEPA” focused on
identifying opportunities for growth and for increasing trade and investment between Indonesia and the
European Union. The conference was organised by KADIN Indonesia and the five European Business
Chambers (BritCham, Ekonid, EuroCham, IFCCI and INA).

During his keynote speech, H.E. Olof Skoog, EU Ambassador-designate for Indonesia, Brunei Darussalam and ASEAN underlined the need to forge closer ties in trade and investment. “With the EU being the second largest export market for Indonesia, and the second largest investor, both sides stand to gain from a comprehensive economic partnership agreement. Deepening the trade relationship with the EU is a win-win situation, as the EU and Indonesia have complementary economies. Indonesia enjoyed a healthy EUR 5.7 billion trade surplus with the EU last year. Concluding an agreement will increase overall trade by improving market access and, just as important, it will attract even more European investments to Indonesia, by providing for a transparent and predictable regulatory framework through a CEPA.”

He added, “the EU has launched trade negotiations in the ASEAN region with Thailand, Malaysia and Vietnam, and we have recently concluded and signed with Singapore. We are making good overall progress in these negotiations. We believe that Indonesia would also offer an excellent case for starting negotiations for a deep and comprehensive CEPA. Once agreements are concluded with further ASEAN countries, the risk is that Indonesia will lose attractiveness, and lag behind further in terms of EU trade and investment in the Asian region. We need to avoid that scenario."

The Vice Chairman of KADIN Indonesia, Mr. Chris Kanter pointed out that different from other bilateral relationships Indonesia and the EU share complementary interests. “We need European investment, and the Europeans need emerging markets. That’s a perfect match.”

The Chairman of the European Business Chamber in Indonesia, Mr. Jakob Friis Sorensen echoed: “The
Indonesian and European economies are very complementary. For every challenge in Indonesia, in every
sector, European business can bring solutions. So we need to create a conducive environment for investments and partnerships”.

The successful annual dialogue forum, which featured a round table, a panel discussion and several sectoral meetings, produced concrete solutions and joint recommendations on issues affecting trade and investment between the EU and Indonesia. The roundtable discussion of CEOs representing both European and Indonesian companies called upon the governments of Indonesia and the European Union to start negotiating a CEPA. The benefits to be achieved from an ambitious CEPA in terms of increased trade and investment were discussed especially for SMEs and particularly relevant given that businesses are part of global supply chains. Despite the concerns of a CEPA creating more competition, it was emphasized that in fact due to the complementary nature of EU-Indonesia trade, a CEPA would in fact attract greater trade and investment by creating more certainty for businesses. Based on WTO rules, preferential tariffs will be ending shortly and representatives from certain sectors strongly requested to move ahead with a CEPA in order to compete in the global arena.

The governments of Indonesia and the European Union were called on re-focus their efforts on kick starting the negotiations and swiftly conclude a CEPA in order for both sides to benefit from a stronger and closer
partnership. The recommendations prepared during this two-day conference will be presented to the Indonesian Ministry of Trade and to the European Commission to help increase trade and investment opportunities and to feed into the on-going CEPA negotiations.

The EU and Indonesia have built robust commercial relations, with bilateral trade accounting for approximately EUR 25 billion in 2012. In addition, the EU is the second largest investor in the Indonesian economy. In the past years, an estimated 1000 European companies have invested about EUR 130 billion into the economy and directly employ 1.1 million Indonesians.

However, even at a record high of EUR 25 billion, overall EU-Indonesia bilateral trade is well below some of the other neighbours in the region (Singapore – EUR 52 billion, Malaysia – EUR 35 billion and Thailand – EUR 32 billion), despite the fact that Indonesia is the largest economy in ASEAN. Furthermore, although the EU is also one of the largest sources of FDI for Indonesia, during the period 2004-2010, Indonesia received only 1.6% of all EU FDI going into Asia, and only 6% of all EU investments flowing into the ASEAN region.
Against this background Indonesian and European business leaders underlined that it was time to add value to the strategic commercial partnership between the EU and Indonesia by moving towards an ambitious CEPA.