Indonesia has expressed a lack of interest in the Trans Pacific Partnership (TPP) even though neighboring countries, the Philippines and Thailand, will likely join the United States-led regional trade pact.
Trade Minister Gita Wirjawan said on Wednesday that Indonesia still had not made a full assessment of the TPP and would study thoroughly any benefits it stood to gain from entry into the partnership.
“I’ve been saying to the people that we’re not at the point of being able to ascertain whether or not the TPP will be beneficial to Indonesia. At the same time, we are dealing with all the bilateral agreements that we are engaged with as well as regional [partnerships],” Gita said during a trade conference in Jakarta.
Based on the Trans-Pacific Strategic Economic Agreement (P4) between Brunei Darussalam, Chile, New Zealand and Singapore that came into force in 2006, the TPP is currently being considered by 11 countries across the Pacific rim, including South Korea and Japan, with a combined gross domestic product of US$21 trillion and accounting for 30 percent of global output.
It aims to go beyond a regular free trade accord, covering areas usually excluded from trade agreements, including government procurement, and labor, environment and intellectual property standards.
Although TPP leaders aim to conclude the pact by December, major hurdles remain. They include market access issues, such as liberalization of trade barriers on dairy products, sugar and rice, import tariffs on textiles, clothing and footwear, and services trade reforms.
The Trade Ministry’s director general for international trade cooperation Iman Pambagyo said that Indonesia was currently focused on two priorities: The preparations for the establishment of the ASEAN Economic Community expected in 2015, and the talks for the regional comprehensive economic partnership planned for May this year.
“These are the priorities that we see as more feasible to complete,” he said, adding that in terms of bilateral agreements, Indonesia aimed to accelerate free trade negotiations with South Korea.
Jeffrey J. Schott, a senior fellow at the Washington-based Peterson Institute for International Economics, said that the TPP would help Indonesia maintain its competitive edge in the Asia-Pacific region.
“You have to benchmark with your neighbors, ensure that your firms stay competitive, otherwise investors would rather invest in other countries. Right now, investment is still coming in, but you have to ensure the policy environment going forward is conducive so that investment will continue to flow,” he told The Jakarta Post on the sidelines of the conference.
According to the institute’s estimate, the TPP accounts for 27 percent of Indonesian exports.
The preferences under the pact would allow Indonesia’s exports, worth US$4.5 billion, to better compete with similar goods from Vietnam, which has already joined.
Apart from that, Indonesia could also see its gross domestic product (GDP) increase by 4 percent above baseline by 2025, with exports surging by almost 20 percent.