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EU does not just “talk the talk”. When it comes to trade and investment with Indonesia we “walk the walk”!

Indonesian Vice President Jusuf Kalla speaking at the EIBD

November 27, 2014 Comments (0) Economic & Trade, Indonesia & The EU

The EU-Indonesia Business Dialogue was held on 19th November. It would be no exaggeration to state that it was a great success. The event was opened by no less than the President of the European Union Council HE Herman Van Rompuy and Vice President of the Republic of Indonesia HE Jusuf Kalla. Furthermore, the Trade and Transport Ministers and the Presidents of Kadin and Apindo actively participated along with high level trade negotiators from Brussels. This of course should come as no surprise. The European Union and Indonesia are very much strategic trade partners. Europeans are often not very good at promoting their strengths. Allow me to shamelessly do so now. Did you know that:

  • The EU is the world’s biggest economy, the world’s largest trading block in goods and services, the largest investor worldwide and the largest recipient of foreign direct investment. The EU is also the largest donor of development aid.
  • The EU has now overtaken China as the largest export market for Indonesian goods. Let me repeat. More Indonesian goods are exported to the EU than anywhere else in the world
  • Unlike with China and Japan, Indonesia enjoys a large trade surplus with the EU.
  • The EU has overtaken Japan this year to become the second biggest investor in Indonesia after Singapore.

Many countries appear to be coming out with noble investment intentions vis-à-vis Indonesia. But whereas they “talk the talk“, we already “walk the walk“. Furthermore, as regards investment, Indonesia, which represents about 40% of ASEAN GDP only receives about 12% of all EU investments flowing into the region. Imagine how much more EU investment would come into Indonesia if there is a more transparent, predictable and business friendly regulatory environment!

As well as being impressive in size, European investment in Indonesia is different. Unlike some operators, EU investment is not just about winning market share or growing profits. EU business provides and sustains over a million high-quality jobs for Indonesian workers. EU companies transfer skills and technology to this country. And they embody a special social model and approach towards their most important asset, namely their employees.

Indeed the EU and Indonesia have “complementary” economies. Deepening our trade relationship will not cause a surge in imports. It will rather increase trade overall in a “win-win” scenario. Some independent Indonesia studies that will be released soon show that a comprehensive economic agreement between the EU and Indonesia would boost our overall trade – including Indonesian exports and facilitate more FDI from the EU. Indeed, deepening the trade relationship – while increasing trade in both directions – would still mean a trade surplus for Indonesia.

A deep comprehensive trade agreement with the EU can commence very quickly. This is why we have concluded with Singapore and are negotiating with Vietnam, Thailand and Malaysia in the ASEAN region. We have also launched specific investment negotiations with China and with Myanmar. All this shows clearly: the European Union as the world’s largest trading bloc remains very much open for business; including with many of Indonesia’s direct competitors.

Let me conclude by saying that while the EU is now Indonesia’s largest export market for goods, we are certainly not today realising the full potential of our relationship. President Widodo’s ambition and drive to improve the business climate must be applauded. We must also reduce barriers to the flow of trade and investment in both directions and encourage the exchange of good ideas and technology. The EU remains committed to negotiating a comprehensive CEPA with Indonesia, but we need to get the substance right. All studies point to a “win-win” outcome. It would certainly mean an increase of exports for Indonesia to EU, continuation of the trade surplus for Indonesia and definitely far more investment into Indonesia from the EU. It would contribute to the development of a diversified and higher value added economy, as well as help develop Indonesia into the manufacturing hub of ASEAN. In short: we already “walk the walk”. And we are ready to pick up the pace with Indonesia and taken even larger strides forward!

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