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CEPA expected to boost EU’s low investment in Indonesia
The European Union expects an economic deal it is discussing with Indonesia to boost investment in Southeast Asia’s largest economy, which it says is still below potential
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The European Union expects an economic deal it is discussing with Indonesia to boost investment in Southeast Asia’s largest economy, which it says is still below potential.
Up to the present, accumulative EU investment amounts to €25 billion (US$27.3 billion), only 15 percent of the bloc’s overall investment in ASEAN countries, according to data from the EU’s delegation to Indonesia and Brunei Darussalam.
EU Ambassador to Indonesia and Brunei Darussalam Vincent Guérend said that investment from European companies in Indonesia was much lower than that in its Southeast Asian peers, particularly given the huge size of its economy.
“European companies are by far the first provider of foreign direct investment, but only 15 percent goes to Indonesia, whereas, as we all know, Indonesia’s share in ASEAN GDP [gross domestic product] is 35 or so percent. So, this missing gap of 20 percent means you don’t get your fair share,” Guérend told The Jakarta Post in an exclusive interview on Tuesday.
“The reason why you don’t get your fair share is because, sorry to say, European companies prefer to go elsewhere because they can do better business elsewhere,” he added.
The 27-member bloc eyes a wide range of sectors for investment, including financial services, retail, consumer goods, agriculture, fish and seafood processing, textile and footwear, Guérend further said.
Apart from investment, the comprehensive economic partnership agreement (CEPA) is in general expected to open bigger access for European businesspeople to tap into enormous opportunities in the market of more than 260 million people that has an abundant labor force and natural resources.
The EU’s investment in Indonesia is not only comparably smaller than that received by its neighbors, like Thailand and Vietnam, but also by other developing economies of similar size, such as Brazil and Mexico. Supported by existing economic agreements with the bloc, the latter two countries have received €300 billion and €100 billion, respectively.
The smaller figure of investment in Indonesia has in turn lowered trade figures compared to other neighboring and developing countries.
Total trade between the EU and Indonesia settled at $25.1 billion last year, much lower than the bloc’s 2016 commerce with Vietnam of $53.6 billion and with Mexico of $61.4 billion, according to data from Trade Map.
In terms of trade, Indonesia is EU’s fifth largest trading partner in Southeast Asia and its 30th biggest in the world. The EU, meanwhile, is Indonesia’s fourth largest trading partner.
Separately, the Trade Ministry’s director general for international trade negotiations, Iman Pambagyo, said that Indonesia would continue talks on the CEPA despite escalating tension over the future of palm oil trade.
The European Parliament recently issued a resolution calling for European nations to gradually phase out the use of palm oil that is not sustainably produced, which it says has contributed to deforestation. Indonesia is the world’s biggest palm oil producer.
“We are not freezing the CEPA negotiations. We even aim to raise the palm oil issue in the context of trade and sustainable development in the CEPA framework,” Iman said in a text message Wednesday.
The talks on the CEPA entered the second round in January and will continue to the next round in September with both parties expecting their conclusion by the end of 2018.
The CEPA is set to address some new issues that Indonesia has yet to put onto the table with other trade partners, such as government procurement, and a new type of investor-state dispute settlement.
