Vision Group Report: Invigorating the Indonesia-EU Partnership

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Architecture of the CEPA 20 4 The Vision Group envisions an evolution in trade and investments which positively interacts with accelerating development, especially through value creation in more advanced goods and services sectors. In turn, this is expected to lead to poverty reduction and job creation, while pursuing a sustainable environment for both parties. The Vision Group has endeavored to provide a “comprehensive” view on all aspects of the EU Indonesia economic relationship, given that the economies of the respective partners are complementary, not just in the sense that they are “not competing” but also that each side has “unique selling points” which can and should benefit the other. This implies we do not just talk about tariffs and other barriers to market access, including direct investments, but also about infrastructure development, public private partnerships, possibily increased roles for export credit agencies and local content requirements. “Comprehensive” means too that efforts are required to more deeply engage European businesses with Indonesia. Both the layout of this report and the proposed architecture of the CEPA reflect this approach. The basic architecture of an innovative Comprehensive Economic Partnership Agreement is constructed like a pyramid based on three main pillars 1. Market access 2. Facilitation of trade and investment 3. Capacity building MARKET ACCESS ARCHITECTURE CAPACITY BUILDING FACILITATION (TRADE & INVT) The CEPA has to be a comprehensive and integrated agreement promoting trade and direct investment as part of an overall relationship as incorporated in the PCA between Indonesia and the EU. Moreover, the Vision Group recognizes the difference between the EU as a developed economy and Indonesia as an emerging economy. It therefore recommends that the different stages of development are reflected in all elements of CEPA. This requires a new style of agreement incorporating the traditional provisions covering trade in goods and trade in services alongside far greater emphasis on newer components in such agreements designed to facilitate inward investment generating value-added for the economy through: • The promotion of increased private sector participation in services and non-services sectors. • Improved protection and implementation of intellectual property rights. • A fundamental shift towards sustainable development backed by the capacity building needed to make it work. Given the considerable progress already achieved by Indonesia and the EU on tariff reductions and liberalisation of trade, now is the right time and context for an
innovative agreement to bring momentum to Indonesian plans to strengthen and diversify its economy - using a trade and economic cooperation agreement to boost its competitiveness and investment climate. To ensure maximum benefits from a comprehensive agreement between the EU and Indonesia, capacity building and trade facilitation are the primary vehicles to optimise market access whilst improving the operating and investment climate, building on the recently improved investment performance of Indonesia. The EU and Indonesia have already taken capacity building to a new level by developing a strong model to ensure opportunities for Indonesia are seized and hurdles encountered in penetrating the EU market are removed. This is articulated in three key areas: 1. Dialogues to identify opportunities and remove hurdles. Examples of this are the EU Indonesia Business Dialogue (EIBD) that allows business representatives from both partners to meet, network and discuss policy with the EU and Indonesian government. There are also regular government to government meetings where these issues are discussed. A key innovation here is that business to business dialogues directly influence resource allocation and have direct access to policy makers to communicate their needs. 2. Technical Cooperation. Technical bodies and institutions involved in the regulatory process are brought together to identify specific actions that will help realise opportunities or remove hurdles. Examples of this have been dialogues on fisheries to help ensure Indonesia’s exports to the EU meet regulatory SPS requirements. Also agreements on air safety where technical dialogue has helped ensure Indonesian carriers can continue to fly into Europe. 3. Financial Cooperation. Financial support is provided by the EU to help address particular areas that come up in the dialogues or technical committees, ensuring that Indonesia can take advantage of opportunities in EU. At present, the EU is providing over €50 million to help Indonesia meet international export requirement or standards and to improve its competitiveness through the sustainability of production methods. The comprehensive and ambitious concept behind the CEPA is based on the recognition of three trends and economic realities: 1. Increased cross-border flows of goods, services, capital, technology and people have diminished the importance of traditional trade measures, since great progress on liberalisation has already been made. 2. Drastic reduction in the costs of transportation and telecommunication technologies stimulates economic progress, nationally as well as internationally, in economic exchanges and over value chains. Economic development is increasingly market-led by consumers and the private sector and the task of governments is to help to adapt regulations to facilitate these newly liberated economic energies. 3. The short term context is a system of asymmetric economic relations between more developed economies and economies in transition leading in the medium term to a far more balanced global economic system with Indonesia playing a leading role as an emerging global economic hub based in Asia, and with Asia providing a major impetus for global economic growth. Given these dramatic changes, the capacity of the Indonesian economy to exploit its comparative regional and global strategic advantage depends upon the rate at which economic growth could be sustained by the mobilisation of resources to improve production quality, services and standards. This is necessary in order to make good use of the economic opportunities afforded by a much deeper economic cooperation and trade agreement with the EU. The following chapters cover the main areas to be included in the agreement starting with market access in goods, services and investment but looking also at public procurement, Intellectual Property Rights and competition. The Vision Group also discussed extensively some of the priority sectors for Indonesia and the EU, which have been included in annex 1. 21
Page 1 and 2: Invigorating The Indonesia-EU Partn
Page 3: Abbreviations ACP Africa, Caribbean
Page 6 and 7: SUMMARY OF THE TERMS OF REFERENCE F
Page 9 and 10: CONCLUSIONS AND RECOMMENDATIONS 7
Page 11 and 12: often be accentuated by the combina
Page 13: 20. Furthermore, in order to increa
Page 16 and 17: Relations between Indonesia and the
Page 18 and 19: eaching almost 7% in the last quart
Page 20 and 21: The existing EU and Indonesia allia
Page 24 and 25: Market Access in Goods 22 5
Page 26 and 27: 24 Members have an effective opport
Page 28 and 29: Services are of increasing importan
Page 30 and 31: manufacturing and services (banking
Page 32 and 33: trade will bring to bear considerab
Page 34 and 35: poor management 5 . As a result the
Page 36 and 37: Competition policy is a necessary m
Page 38 and 39: increasingly demanding “environme
Page 40 and 41: 38 14 Communication strategy
Page 43 and 44: PRODUCT SECTORS OF SPECIAL IMPORTAN
Page 45 and 46: are concerns in Indonesia over poss
Page 47 and 48: nature of complex and fairly aggreg
Page 49 and 50: to exploit potentially beneficial c
Page 51 and 52: In the political cooperation area,
Page 55 and 56: BACKGROUND NOTES 53
Page 57 and 58: 2. DEVELOPMENTS Even though the tra
Page 59 and 60: 1. to complete its ambitious negoti
Page 61 and 62: Data collected from an investment s
Page 63 and 64: direct recourse to international ar
Page 65 and 66: 2.2. EU Member States EU Member Sta
Page 67 and 68: - Component 2 (implemented by UNICE
Page 69 and 70: 7. Indonesia to improve the investm
Page 71 and 72: Indonesia is the largest timber exp
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3. TECHNICAL COOPERATION The REACH
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The implementation of National Indo
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Cooperation and coordination betwee
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The proposal also puts forward a ne
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The EU’s objectives are to secure
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82 1. INTRODUCTION Indonesia and th
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In the last decade, the expansion o
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Indonesia’s automotives industry
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88 Rapidly expanding services secto
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There is remarkable scope for coope
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In Indonesia the processed foods in
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Electronics is Indonesia’s larges
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One of the fastest growing segments
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The textile, clothing and footwear
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100
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Delegation of the European Union In
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Vision Group Report: Invigorating the Indonesia-EU Partnership

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