RI may miss benefits from ASEAN-EU FTA deal

The Jakarta Post ,  Jakarta   |  Tue, 03/25/2008 12:43 PM  |  Business

Indonesia stands to lose out on benefits from the planned free trade agreement (FTA) between the EU and ASEAN unless it improves its negotiation capacity and coordination, an official says.

The Trade Ministry's director general for regional trade cooperation, Iman Pambagyo, said the lack of coordination among ministries and among ASEAN countries was one of the challenges Indonesia faced in preparing for the agreement.

"Indonesia lacks the capacity to enter and make the most from the expected deal," Imam said at a seminar on EU-ASEAN FTA negotiations Monday.

These limitations were likely to put Indonesia at a disadvantage when the deal is completed, he said.

Confronted with a lack of experience in negotiating FTAs, as well as a self-centered culture among government agencies, the Trade Ministry is working hard to improve its mechanisms for negotiating with its international counterparts.

Representatives from the EU and ASEAN began official negotiations in May 2007. The agreement is expected to be completed by 2010 at the latest and implemented fully by 2015.

With a total population of 565 million, ASEAN makes up one of the largest single regional markets in the world. Its members have a combined annual trade volume of around US$850 billion, about the same as Japan's.

The EU, the world's largest single market, is the third largest importer of products from ASEAN countries, after the United States and Japan. Around 12 percent of ASEAN's imports are from the EU, while 15 percent of its total exports are destined for the EU.

Up to 26 percent of foreign direct investment in ASEAN comes from the EU.

If combined, ASEAN and the EU would form a market of around 1.1 billion people.

At the seminar, Djisman S. Simanjuntak, an Indonesian delegate to the EU-ASEAN Vision Group responsible for conducting feasibility studies for the deal, highlighted a different aspect.

"Our feasibility study shows the FTA promises positive welfare, output and employment outcomes. However, some members may gain more than others, depending on the nature of each country," said Djisman, who is also an executive for the Centre for Strategic and International Studies.

He said Indonesia could gain more if it carried out progressive measures to prepare its human capital for the valuable opportunities offered by the agreement.

"We know Indonesia is weak in equipment-intensive industries like manufacturing. However, there are a number of other opportunities to focus on, such as health services and tourism," he said.

Djisman also said the FTA would have a strong dynamic impact -- attracting new investment and corporate consolidations.

One of the EU's proposals is for duty exemption off at least 90 percent of the trade and tariff lines.

Since 2006, the EU has prioritized FTA negotiations with India, South Korea and ASEAN. However, the deal with ASEAN remains the EU's third priority because of the region's complexity.

ASEAN is made up of 10 nations that are at different levels of economic development.

Andreas Julin, counsellor for the European Commission to Indonesia, Brunei Darussalam and East Timor, said governments needed to have a long-term vision and consult the business community during the negotiations.

"The EU and ASEAN have different points of departure. But here we are trying to develop an agreement that will be applied in the next five to 15 years," he said.

The Indonesian government is still developing a process for gathering feedback from the business community.

The next and fourth meeting for the FTA negotiations is scheduled for April. (lva)

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