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n economic cooperation agreement between Indonesia and Taiwan would benefit both nations, despite Indonesia’s one-China policy, according to a recent study.

The one-year study, carried out by the Indonesian Institute of Sciences (LIPI) and Taiwan’s Chung-Hua Institution for Economic Research (CIER), said that an agreement would benefit Indonesia by boosting labor absorption, industrial performance, bilateral trade as well as the capacity of local small and medium enterprises (SMEs).

An agreement might boost local demand for unskilled labor in the apparel industry by 1.5 percent and in the textile industry by 0.6 percent, according to the report.

Meanwhile the report claimed that an economic cooperation agreement would boost the local need for skilled labor in the motor vehicles and spare parts industry by 0.49 percent, while increasing output 1.16 percent in several industries, such as apparel, textiles, motor vehicles and parts, electronics and food products.

“Closer economic cooperation between the two countries is very promising,” Adriana Elizabeth, the economist who headed LIPI’s team of researchers, told The Jakarta Post on Thursday after the report’s launch in Jakarta.

Adriana said that the nations could “complement each other, with Indonesia providing natural resources and labor, for instance, while Taiwan can offer technology and capacity building”.

The report said that Indonesia should reevaluate or tweak its one-China policy, which the authors said had created hurdles to brokering closer economic ties between Taiwan and Indonesia, which maintain quasi-official relations in the absence of formal diplomatic ties.

Taiwan runs the Taipei Economic and Trade Office in Jakarta to accommodate its commercial interests in Indonesia, while Indonesia operates the Indonesian Economic and Trade Office to Taipei in Taiwan.

“Respecting the one-China policy doesn’t mean defending China’s interests. We do respect the policy, but need to think about the maximum economic benefit that we can obtain from Taiwan,” Adriana said.

Chaw-Hsia Tu, the researcher who led the CIER team, said that Taiwan would see its exports rise by roughly US$1.5 billion upon the elimination of import duties with Indonesia, as well as due to liberalization in the service sector and improvements in the customs clearance process, especially for textiles, chemicals, rubber and plastic products, electronic equipment and
machinery.

Taiwan’s imports would also likely jump by $750 million, which would likely comprise agricultural products and processed foods, textiles, chemical, rubber and plastic products, motor vehicles and parts, electronic equipment and machinery, the report said.

Indonesian Employers Association (Apindo) chairman Sofjan Wanandi said that the private sector needed breakthroughs in Indonesia’s one-China policy to realize the economic cooperation agreement.

“We can make a separate agreement on trade and investment as an initial step to a more comprehensive agreement. That will serve as a building block to guarantee investment from Taiwan firms,” Sofjan told the Post.

Taiwan has been one of the biggest foreign direct investors in Indonesia, with its cumulative investment to date reaching $14.68 billion, according to the Investment Coordinating Board (BKPM).