Editorial: Bolstering Japan-RI ties

Wed, 07/02/2008 10:53 AM  |  Opinion

The Japan-Indonesia Economic Partnership Agreement (JIEPA) came into force Tuesday, on the 50th anniversary of diplomatic relations between the two countries. However, the strategic accord did not received as much publicity as it deserved, possibly because there were no significant issues worthy of public debate within the bilateral relationship.

People here seem to take it for granted that overall relations and cooperation have advanced in all fields, notably in the economic sector. The economies of both countries are complementing each other -- Japan supplies the technology and financial capital badly needed to develop Indonesia's rich natural resources and to generate jobs for its huge pool of low-cost manpower.

Our impression is such that the general public, notably the business community, have not been adequately briefed on the strategic importance of the programs stipulated in JIEPA.

True there are no significant issues within their bilateral relations, but the success of the bilateral cooperation over the past 50 years and the changes in the structures of their respective economies have brought a new challenge -- how to elevate the cooperation to a higher level in all fields.

The central agenda of the agreement signed last August still focuses on economic cooperation, notably in trade and investment. JIEPA will go a long way to bolster exports from Indonesia to Japan as the agreement abolishes import tariffs on more than 90 percent of industrial products and agricultural commodities such as fruits, shrimp and forest products.

However, the agreement includes much broader and better-targeted programs than the conventional ways of facilitating trade and promoting investment usually do. JIEPA programs of action also give high priority to human resource development and institutional-capacity building through training programs for Indonesian workers and businesses in various manufacturing and service areas as well as in quality standardization.

This is the natural development, which was brought about by their successful cooperation over the past 50 years.

In the field of investment, for example, Japanese investors are no longer interested in labor-intensive manufacturing in Indonesia. In trade, Japan now needs a wider variety of consumer goods and various other finished products, instead of raw commodities such as oil, gas and minerals, which had long dominated its imports from Indonesia.

As a result of its higher welfare standards, Japan also needs more trained workers in various sectors such as health care.

Hence, lies the importance of training programs and facilities the Japanese government will provide for Indonesian workers and businesses under JIEPA. The zero import tariff facility will mean nothing for export promotion if Indonesian companies are not able to meet Japan's quality standards for goods and services and rules on the country of origin.

Indonesian nurses and health care workers will be allowed to undergo training in Japan to acquire the knowledge and skills necessary to pass Japan's national nursing and health care-worker examinations and continue working in their profession in Japan.

Indonesia's molding and die industries, the bedrock of manufacturing operations, including those in automotive, motorcycles and electric sectors, will be boosted through Japan's training programs. Likewise, Japanese trainers will help to increase productivity and promote quality control.

Japan will help Indonesia develop industry clusters to improve the competitive edge of its manufactures on the international market.

A single-industry cluster focusing a specific group of products can generate localization economies arising from specialization, which extends to suppliers, labor markets, infrastructures and logistics.

Industry clusters could reduce the costs of transportation and significantly improve supply chain management. This in turn could decrease the costs of distribution and other logistical arrangements. Superior logistical capability in industry clusters allows companies to revamp their supply chain management to ensure the smooth movement of goods to the final users.

Japan's External Trade Organization (Jetro) in Jakarta has set up a business desk to help Indonesian companies collect benefits from the trade and business opportunities to be generated by JIEPA.

This is, however, far from enough. The Indonesian government, the trade and manufacture industries, the Indonesian Chamber of Commerce and Industry and their respective offices in the provinces should reach out to local companies, enlightening them of the new business and employment opportunities to be created by JIEPA both in Japan and Indonesia.

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