Vision Group Report: Invigorating the Indonesia-EU Partnership
Vision Group Report: Invigorating the Indonesia-EU Partnership
Vision Group Report: Invigorating the Indonesia-EU Partnership
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eaching almost 7% in <strong>the</strong> last quarter of 2010. External<br />
trade also expanded at an accelerating rate despite <strong>the</strong><br />
2008-2009 global crisis. This improvement in economic<br />
performance is remarkable given <strong>the</strong> background of a<br />
complex political transition to a much decentralized<br />
democratic political system.<br />
Aware of <strong>the</strong> need to catch up with more developed<br />
neighbors in Asia, accelerating development is a very<br />
important priority for <strong>Indonesia</strong>’s policy making. The<br />
government has made great efforts in recent years to<br />
de-bottleneck infrastructural development, alongside<br />
bureaucratic reform to mitigate or even remove inertia<br />
and to mobilize support for new economic development<br />
corridors. Assuming some success in bureaucratic reform,<br />
<strong>the</strong> average medium-term growth rate in <strong>Indonesia</strong><br />
can rise to more than 7%. External trade and foreign<br />
investment are bound to benefit from such an acceleration<br />
and facilitation of development.<br />
Boosting trade with <strong>the</strong> <strong>EU</strong> and investments by European<br />
companies (now one of largest traders and investors)<br />
plays an important element in <strong>Indonesia</strong>’s development<br />
16<br />
strategy to maintain a balance in external economic<br />
relations as well as to access job-creating investments,<br />
technologies, and corporate governance and management<br />
practices.<br />
The European Union trade policy strategy is summarized in<br />
its (2010) “Trade, growth and World affairs” communication,<br />
updating and refining its 2006 strategy ‘Global Europe’. The<br />
<strong>EU</strong> has a long tradition of open markets, both internally<br />
to <strong>the</strong> <strong>EU</strong> via <strong>the</strong> single market as well as externally via<br />
multilateralism, regional and bilateral agreements and<br />
unilateral trade policies (such as <strong>the</strong> GSP 1 ). The only<br />
exception is temperate-zone agricultural products, but<br />
even in this segment, regional and bilateral agreements<br />
have increasingly ‘softened’ access in this area and this<br />
process might well continue, be it slowly, given <strong>the</strong> various<br />
FTAs being negotiated. For <strong>Indonesia</strong>, this exception seems<br />
anyway to be of marginal relevance.<br />
The <strong>EU</strong> has practiced (ever since <strong>the</strong> 1957 Rome treaty)<br />
“national treatment” for incoming FDI. For services, it is<br />
1 As well as EBA, <strong>the</strong> Everything-But-Arms unilateral zero tariffs<br />
initiative for <strong>the</strong> 48 least developed countries.