Interview: Gita Wirjawan
What are the reasons behind Indonesia’s third consecutive trade deficit in July 2012, and what is your forecast for the 2013-14 period?
GITA WIRJAWAN: The trade surplus for January to July 2012 was $335m, down sharply from the previous year of $16.3bn. The decline was mainly triggered by the decrease in non-oil trade surplus of $1.4bn, down 91.5% year-on-year (y-o-y) and the oil trade deficit of $1bn. The fall in the non-oil trade surplus was driven by weakening demand in export markets as a result of the prolonged international crisis. Global conditions have also affected Indonesia's export commodity prices.
The IMF currently projects that the global economy will return to healthy growth from 2014 to 2016. Similarly, Indonesia's GDP is expected to rise 6.8%, according to the 2013 draft budget. The increase in GDP in 2013 will certainly be supported by exports and imports, which are projected to rise 11.7% and 13.5% respectively. The Ministry of Trade’s 2012 Strategic Plan, meanwhile, stated that manufacturing’s share of non-oil exports will continue to increase, in line with the government’s policy of prioritising value-added exports. Meanwhile, exports of mining products will be increased thanks to greater demand and higher prices.
How do you assess the difficulties faced by Indonesian companies trying to enter neighbouring markets due to domestic regulations?
WIRJAWAN: Work toward the ASEAN Economic Community (AEC) was started in 1992 when member states embarked on the common effective preferential tariff for the ASEAN Free Trade Area. This was followed by the adoption of the ASEAN Framework Agreement on Services and ASEAN Investment Agreement in the mid1990s. This was enhanced in 2007 with the adoption of the AEC Blueprint 2015, which details the steps to realise AEC by 2015, added further momentum.
The challenge facing ASEAN is to minimise the national variations of existing ASEAN agreements. We see some progress on this, although much is yet to be done to bring all national laws and regulations in ASEAN member states in line with our regional commitments. Consultations with the private sector are carried out on a regular basis to identify areas where domestic regulations in member states may restrict flows of trade and investment, and senior officials have regular meetings to discuss and solve this.
Given the global economic slowdown, which new international markets is the ministry prioritising?
WIRJAWAN: We are mapping export targets for 2013, which focus both on countries and commodities, and contribute significantly to Indonesia’s exports and nontraditional markets. In fact, non-oil exports to emerging markets have increased considerably, although the value is relatively small. Exports to several emerging markets, especially within Africa, grew rapidly during the period from January to August 2012. Indonesia’s exports to Côte d'Ivoire increased y-o-y by 295% to $73.4m, while exports to other countries such as Libya, Mauritania, Guinea, Haiti, Ethiopia, Laos and Liberia also rose.
What are your priorities going forward with regard to Indonesia’s free trade agreements (FTAs)?
WIRJAWAN: With the impasse of the Doha Negotiations for 11 years, Indonesia sees bilateral and regional FTAs, in addition to comprehensive economic partnerships (CEPAs), as building blocks to eventually support the multilateral trading system; our approach is toward CEPAs rather than conventional FTAs.
Bilateral CEPAs with long-term trade and investment partners will be prioritised. ASEAN is also a valuable platform for shaping the regional economic landscape. In fact, Indonesia took the initiative in 2011 to introduce the concept of regional comprehensive economic partnership (RCEPs), by which ASEAN will consolidate the existing ASEAN-plus-one FTAs into a CEPA involving 16 countries. Indonesia has been assigned as ASEAN’s country coordinator to drive the RCEP agenda with the objective of creating a market of some 3.3bn people.
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