Report of the Joint Study Group on the Feasibility of India-Indonesia ...

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Country TTRI (MFN Market Access TTRI
applied tariff)*
(incl. preferences)*
All goods
All goods
===============================================================
Indonesia 50 ( 4.5) 71 ( 4.3)
China 57 ( 5.3) 59 ( 3.7)
South Africa 62 ( 5.7) 49 ( 3.0)
Russian Federation 72 ( 6.6) 30 ( 1.7)
Brazil 92 ( 9.4) 63 ( 3.8)
India 117 (15.1) 59 ( 3.7)
Source: World Bank, World Trade Indicators 2008.
* Rankings and figures in paren<strong>the</strong>ses are values.
Table above lists <strong>the</strong> TTRI for <strong>the</strong> group <strong>of</strong> BRIICS countries (Brazil, Russian Federation, India, Indonesia,
China and South Africa). Indonesia has <strong>the</strong> lowest restrictiveness index
amongst this group <strong>of</strong> countries. However, it faces <strong>the</strong> highest Market Access TTRI, i.e. <strong>the</strong> equivalent
tariffs on its exports globally, including preferential tariffs). This suggests <strong>the</strong> need for Indonesia to push
for lower tariffs from o<strong>the</strong>r countries through negotiations. The Indonesian Minister <strong>of</strong> Trade, Mari
Pangestu, has recently stated that this will be pursued primarily under <strong>the</strong> WTO, but that Indonesia needs to
get lower tariffs not only from developed countries, but also from such countries as India and Brazil. 2
Opening Export Markets
Bilateral agreements, specifically bilateral FTAs (Free Trade Agreements), are currently seen as a means to
open export markets. Indonesia has not been an active promoter and participant in forming bilateral FTAs
as some <strong>of</strong> its neighbors in Sou<strong>the</strong>ast Asia. This has been <strong>the</strong> result <strong>of</strong> a long-held view that beyond
ASEAN (and <strong>the</strong> ASEAN Free Trade Area or AFTA), efforts to liberalize trade should be undertaken at <strong>the</strong>
multilateral level. Indonesia also strongly supports unilateral liberalization efforts under <strong>the</strong> APEC
framework <strong>of</strong> “concerted unilateral liberalization.”
As <strong>of</strong> <strong>the</strong> end <strong>of</strong> July 2008, Indonesia has signed five FTAs that are being implemented, namely: (a) <strong>the</strong>
ASEAN Free Trade Area (AFTA); (b) <strong>the</strong> ASEAN-China FTA; (c) <strong>the</strong> ASEAN-Korea FTA; (d) <strong>the</strong>
Indonesia-Japan EPA (Economic Partnership Agreement); and <strong>the</strong> ASEAN-Japan FTA. They are at
different stages <strong>of</strong> implementation. 3
Indonesia considers <strong>the</strong> ASEAN+1 agreements to be consistent with its overall external economic policy
that focuses on cooperation and integration in ASEAN and <strong>the</strong> wider region. It appears that each bilateral
agreement will by necessity be tailor made to <strong>the</strong> interests and needs as well as <strong>the</strong> circumstances <strong>of</strong> <strong>the</strong>
parties concerned. It will not be easy, <strong>the</strong>refore, to amalgamate <strong>the</strong> many bilateral FTAs involving countries
in <strong>the</strong> region into a region-wide FTA. It is likely that a region-wide FTA will have to be negotiated
separately (and independently) from <strong>the</strong> existing ones. This was <strong>the</strong> rationale behind <strong>the</strong> recommendation
<strong>of</strong> <strong>the</strong> <strong>Joint</strong> Expert <strong>Group</strong> on EAFTA. Indonesia and several o<strong>the</strong>r ASEAN countries are <strong>of</strong> <strong>the</strong> opinion that
for <strong>the</strong> foreseeable future <strong>the</strong>y should still focus on <strong>the</strong> separate ASEAN+1 agreements ra<strong>the</strong>r than on a
region-wide agreement. In addition to signing a framework agreement with China, Korea and Japan,
ASEAN is currently negotiating similar agreements with Australia and New Zealand, India, and <strong>the</strong>
European Union.
So far, <strong>the</strong> only bilateral arrangement that Indonesia has finalized is with Japan. Being <strong>the</strong> first for
Indonesia, <strong>the</strong> bilateral agreement with Japan may be used as a model for Indonesia in <strong>the</strong> development <strong>of</strong>
o<strong>the</strong>r FTAs in <strong>the</strong> future. The Indonesia-Japan EPA is ra<strong>the</strong>r comprehensive. This EPA contains elements
that are not usually seen in an FTA, and are also new for Japan. These are <strong>the</strong> chapters on “Improvement <strong>of</strong>
Business Environment and Promotion <strong>of</strong> Business Confidence” and “Energy and Mineral Resources”. The
former is <strong>of</strong> interest to Indonesia and has been included by Indonesia to seek support from Japan in <strong>the</strong>
improvement <strong>of</strong> Indonesia’s investment climate. The latter is <strong>of</strong> particular interest to Japan. In fact under
this agreement, Indonesia will hold prior consultation with Japan about restricting oil and gas exports in <strong>the</strong>
event <strong>of</strong> a surge in domestic demand. Indonesia also pledges to fully implement existing bilateral energy
supply contracts even when export restrictions are invoked. In return Japan will increase technical
assistance in such areas as coal-to-liquid technologies and energy-saving measures.
The EPA also gives some weight to “Technical Cooperation and Capacity Building.” From <strong>the</strong> outset,