In practice, the biggest impact of joining the TPP will be the lowering of trade barriers, including tarrifs – a policy that Indonesia has had poor experience with previously under the Asean-China Free Trade Agreement. (Antara Photo/Rivan Awal Lingga)

Indonesia in No State to Join Trans-Pacific Partnership, Stakeholders Caution


OCTOBER 28, 2015

Jakarta. Indonesia should learn from previous trade deals before jumping into the US-initiated Trans-Pacific Partnership, analysts say, citing the lack of competitiveness of the country’s manufacturing sector.

“The TPP trade deal can increase trade volume among its members, but can we take a big portion of that trade?” Lana Soelistianingsih, an economist at Samuel Sekuritas and lecturer at University of Indonesia’s School of Economics, said on Wednesday.

“Countries with manufacturing-based exports will be able to perform better in this partnership,” she added.

Her comments came in response to President Joko Widodo’s statement after a meeting with US President Barack Obama on Monday that Indonesia was committed to joining the TPP.

The partnership, forged by the United States and other 11 countries around the Pacific Rim, including Malaysia and Vietnam, has a stated goal to “to promote economic growth; support the creation and retention of jobs; enhance innovation, productivity and competitiveness; raise living standards; reduce poverty in our countries; and promote transparency, good governance, and enhanced labor and environmental protections.”

In practice, the biggest impact will be the lowering of trade barriers, including tarrifs – a policy that Indonesia has had poor experience with previously under the Asean-China Free Trade Agreement (ACFTA).

Lana noted that after the ACFTA came into full effect at the start of 2010, Jakarta’s trade deficit with Beijing doubled within a year.

“Our exports are mainly raw materials like oil and gas. If we can we get our commodities into a market like Chile” – which has signed up to the TPP – “can we compete with Brazil, which is much closer to Chile than Indonesia is? That’s the concern,” Lana said.

Brazil is not a party to the TPP.

Lana argued that boosting the competitiveness of the Indonesian manufacturing sector would require significant upgrades to the existing electricity infrastructure, which she said was lacking.

“How can we improve our manufacturing sector without electricity? It’s not that we should refrain from entering the partnership, but we need a clear blueprint on what products we want to sell, which raw materials we need to manufacture the products, and what kind of infrastructure we need,” she said.

The country’s main business lobby has also cautioned the government to approach the deal with national interests foremost in mind.

“President Joko Widodo sees this [agreement] as an opportunity for our exports. Our work now is to make the best of the TPP agreement for Indonesia’s interest,” said Haryadi Sukamdani, chairman of the Indonesian Employers Association (Apindo). “The TPP should provide a win-win solution.”

Ade Sudrajat, the head of the Indonesia Textile Association (API), echoed the sentiment.

“The most important thing is that we have a strong ground to protect our interest. Free-trade agreements should be able to create job opportunities and bring in foreign exchange,” he said.