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Can Indonesia become the 13th member of the TPP?

02 Nov '15
5 min read


Indonesia's Ambassador to China, Soegeng Rahardjo also expressed the same opinion, saying Indonesia should reconsider its plan to join the TPP before it improves its industrial structure.

"It would be better for Indonesia to thoroughly reconsider its intention to join the TPP. After all, we have joined the Regional Comprehensive Economic Partnership Agreement (RCEP) among the ASEAN and its trade partners, including the United States," the ambassador stated on Thursday.

With an economy of $1 trillion, Indonesia is a member of the Group of 20 major economies. it has eight FTAs in effect, of which six are regional FTAs and two are bilateral (the ASEAN free trade area, AFTA; the ASEAN-Australia and New Zealand, ASEAN-China, ASEAN-India, ASEAN-Japan and ASEAN-Korea FTAs; the Indonesia-Japan EPA and Indonesia-Pakistan FTAs), with a ratio of FTA-trade coverage of 67 per cent.

Unlike conventional trade agreements, the TPP covers not only trade in goods, services and investment, but also involves an extensive coverage that is beyond any trade agreements. The TPP covers 30 articles starting from trade in goods to trade in services, from investment to dispute settlement, from labor to environment and exceptions.

In brief, in the trade in goods, the TPP covers the elimination of about 11,000 tariff lines, including some on sensitive agricultural products like rice, wheat, sugar, barley, beef, dairy products and starch corps. In services, TPP covers areas like banking, insurance, construction, logistics and accounting, travel and tourism, consulting, app and game development and graphic design. In investment, it covers, among other things, repatriation of funds and capital transfers, fair compensation in the case of expropriation, prohibition on performance requirements such as for local content or technology localization requirements.

But Indonesia's notoriously protectionist economy has been stymied by systemic corruption, lower commodity prices and China's economic slowdown. Unemployment among the vast ranks of Indonesia's youth stands at more than 20 per cent and efforts to attract investors have been undercut by economic nationalism, vested interests and red tape.

The bright side of Widodo's stated intention of joining the TPP is that the market may see that Indonesia will seriously assure investors that they will enjoy investment protection and preferential tariff rates for their exports and imports when they invest in Indonesia, the same treatment they get when they have their investments in Malaysia, Singapore or Vietnam, which are currently members of the TPP, and improve trade and investment by reviewing trade policy from a very extensive point of view.

Whether Indonesia will eventually decide to be a member of the TPP, it should keep in mind that the market will not only respond to the number of FTAs Indonesia has been negotiating and signing, but more importantly its consistency in implementing its commitments to regional and multilateral trade agreements and consistency in overall trade policy. It may take about a year and a half to ratify the TPP framework in the member countries and it may take two to three years before they decide to open up for new members, so Indonesia has two to three years to prepare. (SH)

Fibre2Fashion News Desk - India

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