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RI mulls PTA with Turkey to boost bilateral trade
Indonesia plans to set up a preferential trade agreement (PTA) with Turkey, aiming to boost the shipment of commodities and push up exports to US$2 billion in the near future
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Indonesia plans to set up a preferential trade agreement (PTA) with Turkey, aiming to boost the shipment of commodities and push up exports to US$2 billion in the near future.
Under the planned deal, the preference in terms of tariff reduction would be given to only a small number of key items agreed to by both parties, Trade Minister Muhammad Lutfi said.
Indonesia might propose tariff reductions for crude palm oil (CPO) and its derivatives, and Turkey might want tariff reductions for wheat and flour in the negotiations, he added.
A PTA normally cuts import duties for hundreds to thousands of goods and commodities, which is why negotiations can take years to complete.
'We want to be selective by picking merely the most important items to us. That way, we will trade on an equal basis based on our own comparative advantages,' Lutfi told The Jakarta Post on Friday.
Early talks on the agreement between Indonesia and Turkey might begin next month in Bali, according to Lutfi.
Indonesia expects its palm oil to lose its competitive edge in the Turkish market following the recent implementation of a PTA between Turkey and Malaysia, the world's second-largest palm oil supplier.
The Turkey-Malaysia deal lowers import duties of Malaysian palm oil to 20 percent from 31.2 percent, the import duty Indonesian palm oil suppliers have to pay when entering the Turkish market.
Previously, Indonesia's palm oil lost its ground in the Pakistani market to Malaysian palm oil, which had obtained a marked tariff discount of 15 percent, due to a PTA between Malaysia and Pakistan.
Palm oil shipment from Indonesia, the world's biggest producer of the commodity, to Pakistan plummeted from nearly $1 billion in 2007 to $714 million in 2012.
Indonesia is now targeting to export $1.5 billion worth of palm oil and its derivatives to Pakistan by the end of this year, following the implementation of a PTA between Indonesia and Pakistan last year.
Apart from boosting exports, Lutfi said, Indonesia was also eyeing Turkey as a investment destination in the palm oil industry, such as for palm oil refineries.
With its strategic position, Turkey might serve as an export hub to reach out to surrounding countries.
'Turkey supplies [goods to] Iran, Iraq, Syria up to the middle part of Asia. It would be great if we could sell our palm oil to them,' he said.
Currently, palm oil is the top commodity that Indonesia ships to Turkey, a fellow member of the Developing Eight (D-8) Group, along with a wide array of items consisting of palm oil, rubber, cacao, textiles, pulp and paper, windshields, tires and furniture.
On the other hand, it imports wheat flour, tobacco, cotton, iron and steel products and machinery.
Bilateral trade has shown an upward trend in the past five years, rising 19.94 percent on average
annually to settle at $2.85 billion last year.
Exports grew by an average of 22.66 percent each year from 2009 to reach $1.54 billion in the past year, while imports expanded by 17.48 percent to amount to $1.31 billion. That resulted in a surplus of $221.27 million on the Indonesian side.
