Indonesia and the EU: A unique partnership with prospects
Walter van Hattum EU Delegation to Indonesia, Brunei Darussalam and ASEAN
Content 1. EU trade policy 2. EU and Indonesia: Vision 3. And how to go about it?
2
EU Trade Policy
EU a trading power… 15.5 % of world trade (in goods) in 2011
First exporter
Largest importer
14.9% (2011)
16,1% (2011)
EU-27 received €103.9 bn in FDI 2010 (ranking 2nd after US €172.2 bn) 4
So why trade more? • • • •
More trade means more economic growth Trade means more jobs Trade helps reduce poverty Trade and Investment support new ideas and innovation • Trade brings people together and secures economic ties between nations • Trade and investment boosts competition and competitiveness
EU Trade policy Being the leading trade region Strong interest in:
Responsibility towards:
Open markets Clear regulatory frameworks
EU citizens Need to reinforce EU
Rest of the World
competitiveness on world markets
• • • •
Create a global system for fair and open trade Access markets for European companies, their workers and investors Make sure others play by the rules Ensure trade is a force for sustainable development 6
More than trade? • Trade is no longer just about tariffs… - Standards - Licensing practices
• Trade is not just about trade… - Environment - Human Rights - Labour Rights
• Trade supports sustainable development…
Does it result in development? Trade-induced growth should be accompanied by other development measures: – Improving workers skills and educational levels – Investment in infrastructure – Environmental protection – Strengthen safety nets
How does it work in practice? • Provide developing countries with better access to EU market • Promoting EU direct investment towards developing countries • Strengthen trade and investment capacity in developing countries • Support development of physical and social infrastructure enabling sustainable trade
• Generalised System of Preferences (GSP) • Trade Agreements (Free Trade Agreements, Comprehensive Economic Agreements) • Aid-for-Trade (US$ 10 bn) • Other development aid
EU and Indonesia: Vision
EU and Indonesia: Vision Indonesia and the EU: A unique partnership with prospects
Indonesia: the new tiger? Strong economic fundamentals - young population, growing middle class ($3000, 40 M at $6,000+) Sound economic policies and growth - 6.4% despite crises, inflation 4.6%, debt at 25%; reserves at USD 110 billion, limited budget deficit and investment grade Stable politics And yet only EU’s 35th export partner and only 1.6% of our investments
And the EU? • Common market of 27 countries (soon 28!) – 17 countries use the same currency – World’s biggest market – Population 500 million – Over 20% of the world’s GDP – GDP $15 trillion – GDP per capita $ 30 000 – 16% of world's trade – World’s largest importer of food! – But Indonesia only 22nd largest importing partner
Some facts – Trade 3rd largest ďƒ Indonesia surplus of US$ 8 billion
Not just short term! Indonesia gains US$export 8 billion Indonesia's to the EU (billion euros)
19 92 19 94 19 96 19 98 20 00 20 02 20 04 20 06 20 08 20 10
0 19 9
19 88
18 16 14 12 10 8 6 4 2 0
The EU export to Indonesia (in million euro)
Some facts – Investment 2nd 1.1 million people directly employed by EU companies FDI to Indone sia from the EU (million USD, BKPM) 3000
2800
2777
2500 2000
2200
1973
1872
1500 1000 500
1019
821
0 2006
2007
2008
2009
2010
2011
2012*
Investment: 2nd largest but underperforming
Potential? Trade and Investment
Vision Group: towards a CEPA • Trade is complementary (we don’t make the same stuff) and in Indonesia’s favour ($8 bn surplus) • CEPA targets investment as much as trade – already a major investor, CEPA will realise the true potential of EU FDI - a win-win for IDN (jobs, growth and tech transfer) • CEPA’s construction is not like the others (liberalisation yes but with facilitation and capacity building to guarantee IDN interests)
Why beneficial? • CEPA will boost Indonesian trade - $ 9.8 billion additional exports, esp. light industries and transport equipment • Indonesia trade surplus with EU will increase with CEPA. $2 bn more cash in the bank annually. • Boost economy - $6.3 billion additional GDP. • Boost investment from EU - get your fair share of the other 98.4%! • Boost FDI not just for IDN domestic market but also as export base to ASEAN and Asia generally • CEPA secures key market access to EU (GSP is transitory).
Unique? EU Bilateral Agreements
20
And how to go about it?
Unique! How? Market Access
CEPA
Trade Facilitation
Capacity Building
The EU-Indonesia CEPA proposes a comprehensive view on all aspects of the EU economic relationship To ensure win-wins, improved market access (EU faster than Indonesia) is combined with trade facilitation and capacity building Capacity building must learn from past – be comprehensive, be large, involve private sector and focus on outcomes
Ambition of the Vision Group • Tariffs: zero for 95% of tariff lines and trade value in 9 years • Sensitive products • Tackling TBTs and NTMs through cooperation and consultation (joint dialogue) • Commitments on Services and investment • Regulatory framework and bodies • Taxation climate • Investment Protection and Promotion • Opportunities: Infrastructure
Capacity Building? Example Better access of Indonesian fisheries exports to the EU Increased testing capacity in Indonesian laboratories Better research and advocacy capacity in EU and Indonesian chambers of commerce 80EU
Rapid Alerts from Indonesian Fisheries imports fish and products thereof
70
crustaceans Others
60
Total RASFF alerts 50 40 30 20 10 0 2002
2003
2004
2005
2006
2007
2008
2009
2010
24
Dialogue? Example • EU Indonesia Business Dialogue – KADIN, APINDO • ASEAN EU Business Summits • Civil Society Dialogue – palm oil, timber, etc. • Governmental dialogue including areas where Indonesia requires assistance Bilateral issues but looking at opportunities
Opportunities: commodities only? Main exporters to EU 1800 1600
Million EUR
1400 1200 IND 1000
MAL
800
PNG COL
600 400 200 0 2006
2007
2008
2009
2010
Opportunities: commodities only? Timbe r 1000 900 800 700 600 500 400 300 200 100 0
10.0% 9.0% 8.0% 7.0% 6.0% 5.0% 4.0% 3.0% 2.0% 1.0% 0.0% 2001
2003 2005 2007 2009 Indones ia's export to the EU, mln USD Indones ia's import from the EU, mln USD Indones ia's s hare in the EU imports , %
Opportunities? Cos me tics 200
4.0%
150
3.0%
100
2.0%
50
1.0%
0
0.0% 2001
2003
2005
2007
2009
Indones ia's export to the EU, mln USD Indones ia's import from the EU, mln USD % ,Indones ia's s hare in the EU imports
Opportunities? Ele ctronics 1,400 1,200 1,000 800 600 400 200 0
3.5% 3.0% 2.5% 2.0% 1.5% 1.0% 0.5% 0.0% 2001
2003
2005
2007
2009
Indones ia's export to the EU, mln USD Indones ia's import from the EU, mln USD Indones ia's s hare in the EU imports , %
But beyond… • What about automotives... A jointly produced green car? • EU supporting Indonesian clean energy (biomass) • Indonesian processed food to the EU? • Tourism and Education? Continuous dialogue towards … A unique partnership with prospects!!