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RI must clear obstacles to reap benefits from trade with Latin America, Caribbean
Cooperating with partners in far-flung regions is an intricate effort but very much possible nonetheless
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Cooperating with partners in far-flung regions is an intricate effort but very much possible nonetheless.
It is in this spirit that businesspeople from Indonesia, Latin America and the Caribbean are looking for ways to unleash their countries’ potential, despite low awareness of the opportunities for partnership on both sides.
Shermeli Zela Meza is a manager at a mattress company in Peru. She has traveled some 18,500 kilometers to Indonesia because her company wants to import intermediary goods like polyester and tricot to produce mattresses.
According to her colleagues in Peru, Indonesian textiles are among the best in terms of quality.
“But we want to know how to deal with the legal procedures, transportation and other issues before we settle down with an agreement,” Meza told The Jakarta Post on the sidelines of the Indonesia-Latin American and Caribbean (INA-LAC) Business Forum in Tangerang, Banten, on Tuesday.
Meza was among more than 200 participants at two-day event, which served as a platform for businesspeople and decision makers to talk shop and explore potential collaboration to boost trade and investment between the two sides.
Deputy Foreign Minister AM Fachir said the forum was held with the aim of raising awareness about opportunities on both sides and to mitigate the obvious challenges in trade, including the geographic distance and connectivity as well as tariff and nontariff barriers.
“Although we may be separated [by a long] distance, we are connected in many ways through our mutual commitment in aspects such as global peace and sustainable economic development,” Fachir said during his keynote speech on Tuesday.
The forum is expected to bring in business deals worth some US$20 million. Even though that figure marks an increase from the initial target of $12 million, it is still a minuscule amount compared to what was achieved during the Indonesia-Africa Forum in Bali last year, which reached more than $580 million in pledges.
“The increase so far shows that the interest [...] to engage in business activities on both sides is growing,” said the Foreign Ministry’s director for American (II) affairs, Darianto Harsono, on Tuesday, while acknowledging that interaction between stakeholders on both sides was still low.
In Indonesia, Darianto said, the negligible amount of information provided about Latin America and the Caribbean region had resulted in a reluctance to explore the market — in addition to the distance issue.
“There is huge potential, but it has yet to be utilized,” he said.
Moreover, high import tariffs had also prevented businesspeople from expanding to a market that officials say had such a high potential. “We need to improve our engagement with [Latin American and Caribbean countries] to discuss possible trade agreements,” he argued.
Currently, Chile is the only country in the region that Indonesia has a free-trade deal with, namely the Indonesia-Chile Comprehensive Economic Partnership Agreement.
“In the future, we want to expand our dialogue with Mercosur countries [Brazil, Argentina, Uruguay and Paraguay] as well as with Colombia and Peru,” Darianto said.
According to official figures, Indonesia accounts for only 0.75 percent of the region’s trade with the world — underscoring the huge potential for growth in economic partnerships. Countries Indonesia has relatively high volumes of trade with in the region are Brazil, Argentina, Chile and Peru.
“With Peru, for instance, we have around $250 million worth of trade every year, and it can potentially grow to $1 billion,” the official said.
Indonesia had expressed interest in joining the proposed Trans-Pacific Partnership, which, if ever realized, would include Southeast Asian and Latin American countries. But there has been little follow-up after the United States pulled out of the negotiations, and Indonesia has since shifted its focus to the Regional Comprehensive Economic Partnership (RCEP) free trade deal instead.
In addition to business deals, the INA-LAC Business Forum is expected to open doors for other partnerships. So far, Brazilian mining giant Vale and its partners have committed to investing some $5 billion into a nickel-processing facility in Central Sulawesi.
Financial institutions from INA-LAC countries have also signed agreements on export financing. Decision makers on both sides have also agreed to immediately begin preliminary discussions on future free-trade agreements.
Indonesian Chamber of Commerce and Industry (Kadin) member Diono Nurjadin urged Indonesian businesspeople to look beyond the large domestic market.
“It is time to be open to new markets. We can use Latin American and Caribbean countries as not only a final destination but a stepping stone to tap into other markets,” said Diono, who is the head of Kadin’s permanent committee for the Americas and international economic institutions.
The Foreign Ministry’s acting director general for American and European affairs, Teuku Faizasyah, said there was much to explore in terms of complementary trade products. (glh)
