Indonesian Private Sectors View on IA-CEPA Shinta Widjaja Kamdani - PowerPoint PPT Presentation

Indonesian Private Sectors View on IA-CEPA Shinta Widjaja Kamdani Vice-Chairwoman for International Relations, KADIN Indonesia & APINDO

Importance of IA-CEPA IA-CEPA has been in the works for 7 years; In the meantime, economic and business relationship between the two countries is still underweight: Trade between Australia & Indonesia Australian FDI to Indonesia in USD 000 in USD billion 800,000. 120 100 600,000. 80 60 400,000. 40 20 200,000. 0 2012 2013 2014 2015 2016 0. Total Trade Oil & Gas Trade Non-oil & Gas Trade 2010 2011 2012 2013 2014 2015 2016

Importance of IA-CEPA Indonesia Australia Growing urbanization, growing Indonesia is a large market for Australian soft commodities; working-age population and growing economy; Indonesia is a highly potential Indonesia needs Australia’s export market for Australian services sectors; expertise to develop its services sector;

Way Forward: Private Sectors Need Post IA-CEPA IA- CEPA is Indonesia’s 2 nd bilateral trade agreement after IJEPA (2008). IA-CEPA will be a new type of agreement. 5 major elements: 1. Complete liberalization list; 2. An institutionalized mechanism for greater engagement of business communities; 3. Policy adjustments to smoothen the structural shifts; 4. Clear action plans to raise IA-CEPA utilization rate.

Way Forward: Private Sectors Need Post IA-CEPA 1. Complete liberalization list, especially in trade in goods, trade in services, and investment  A high level of knowledge on IA-CEPA is needed to be able to maximize its benefits;  Business strategies formulation toward the IA-CEPA implementation;  Production capacity improvement;  Market access and cheaper input goods.

Way Forward: Private Sectors Need Post IA-CEPA 2. An institutionalized mechanism for greater engagement between the Australian and Indonesian business communities  IA-CEPA should foster investments between 2 countries.  How to encourage business matching between the two countries?  The case of Singapore and India:  IE Singapore and SKP Business Consulting collaborate to promote business matching;  The fees for the service can be offset with financial support from IE Singapore.

Way Forward: Private Sectors Need Post IA-CEPA 3. Policy adjustments for the government to smoothen the structural shifts caused by IA-CEPA  “Lock - in effect” of an FTA.  Different structural responses between developed and developing countries.  FTA creates winners and losers;  Need policies to reforms weak industries, not to protect them.  Adjustment policies at both the firm and worker level are required to mitigate adverse effects of structural changes caused by FTAs.

Way Forward: Private Sectors Need Post IA-CEPA 3. Policy adjustments by the government to smoothen the structural shifts caused by IA-CEPA (EXAMPLE) TAA in in th the e USA TAA in in Sou outh Korea ea  90% of its funds to US workers;  90% of TAA funds are allocated to manufacturers and firms;  TAA program for workers: training and income support  Loans, investments, and job payments, job search and placement support are given out relocation allowances, as well as to small and medium-sized firms other reemployment services. and manufacturers.

Way Forward: Private Sectors Need Post IA-CEPA 4. Clear action plans to raise IA-CEPA utilization rate by private sectors  Outcome of an FTA: utilization rates by private sectors.  ERIA and LPEM FEUI (2013) survey of ASEAN+1 FTAs utilization in Indonesia:  Users: medium and large and joint venture firms;  Government is the sole provider of FTA-related information;  Information is incomplete and segmented.  Low utilization rates bring negative consequence.

Way Forward: Private Sectors Need Post IA-CEPA 4. Clear action plans to raise IA-CEPA utilization rate by private sectors  FTA portal  Indonesia must maximize the growing digital literacy and establish an integrated FTA portal;  DFAT has a very good FTA portal that IA-CEPA can adopted.  Government agency(ies) that monitor the IA-CEPA implementation  South Korea has 3 agencies to guide FTA utilization: FTAPPAA, National FTA Utilization Center (FTAUC), and local (regional) FTA Assistance Centers.

Way Forward: Private Sectors Need Post IA-CEPA 5. Continue the standard mapping project to the second phase.  First phase:  General mapping of Indonesian and Australian standards;  Not yet touch on technical regulation.  Second phase:  Need to select specific sector (pilot project) for further assessment;  Aim for mutual recognition;  Increase buy-in from private sectors.

Final Words.. An FTA is negotiated by government, but utilized by private sectors. The government must shift its strategy regarding FTA : ◦ Avoid misunderstanding of automatic gains from FTA implementation; ◦ Focus more on the technical details. Must avoid the ”FTA fatigue” perception.

Final Words.. Indonesia and Australia are neighbors forever. Now is the time to grow together! “… no country is more important to Australia than Indonesia. If If we fail ail to o get th this is rela lationship ip rig right, an and nurtu ture an and develop it, it, the the whole web eb of of ou our for oreign rela elati tions is is in incomplete. ” Pau aul l Kea eatin ing, former Aus ustra ralia ian Prim rime e Minis inister er (19 (1994 94)

Thank You!