Since 2013 Indonesia had taken the initiative to implement IJEPA as agreed in the IJEPA itself, i.e. “after 5 years (2008 - 2013) the two countries could make general overview in regard to the implementation of the agreement. discussion of TOR of IJEPA Review had been exercised by the two countries since 2014. However in view of different opinion of Japan’s proposal, the definite timing of IJEPA Review would be done by Indonesian Trade Minister and Japan’s METI on January 21 in Tokyo.
As set forth by the Dir. Gen. of International Trading Bachrul Chairi, the overview of IJEPA would focus on implementation of chapters and revision of articles. To Indonesia the IJEPA Review was focused on increase of export of Indonesian goods and services to Japan and the world and stepping up of competitiveness and investment. The IJEPA negotiation would mainly demand to reduce tariff as promised by Japan, i.e. to open more access for agricultural, forestry and marine products and some industrial products.
IJEPA’S main issue was not only related to trade balance. Basically Indonesia’s trade balance had always been surplus for Indonesia. In 2004 surplus for Indonesia was posted USD 4.7 billion in January-October 2013 Indonesia also posted surplus of USD 6.2 billion. For a period of 5 years (2009 - 2013) Indonesia’s surplus tend to shrink by 3.9%. by oil gas and non oil-gas categorization, Indonesia’s surplus tend to post deficit, the biggest being in 2012 amounting to USD 5.49 billion but by 2013 dropped to USD 2.97 billion.
Compared to Trade Balance of the industrial sector, Indonesia’s deficit was higher; by 1212 the deficit was USD 10.85 billion and down again to USD 7,88 billion in 2013. Collaboration was not only in the economic sector as a whole but particularly also focused on Trading.
The Advantages and Disadvantages of IJEPA
IJEPA offered advantages for Indonesia in many sectors including export of goods and investment. Indonesia’s trade deficit was more than 96% from auxiliary goods (62.82%) and capital goods (33.52%) while consumer goods was only 3.66%. Japan was the second biggest investor country in Indonesia; in 2010 up to Q III 2014 Japan’s total investment was posted at USD 11.4 billion including 2.314 projects or 10.34% of total foreign investment in Indonesia.
Most of Japan’s investment was in the automotive industry and heavy equipments plus metal industry, machinery, and electronics. By sector, Japan’s investment in the automotive sector was USD 5.99 billion or 71,84% of total foreign investment. In mental industry, machineries and electronics Japan investment was worth USD 1.9 billion or 19.49% of total foreign investment. Through IJEPA implementation 2013, total trade deficit of non oil gas sector was USD 9.7 billion.
Japan’ total investment effect on Indonesia through 2010 – 2013 was USD 65.5 billion or 8.9% of Indonesia’s total export. Basically Indonesia was advantaged by the non oil gas sector amounting to USD 55.8 billion.
Basically the role of Japan’s investment against Indonesia’s export alone was already that high, i.e. on Indonesia’s export of automotive USD 4,5 billion and printer-computer USD 1.2 billion. Income from Trading Sector was not only from increased forex reserves but also on employment in Indonesia. The automotive industry was the sector with biggest labor accommodation, i.e. 19.849 workers in Indonesia in 2010 – 2014. That number was equal to 30,31% of total labor accommodation by all Japanese investment in Indonesia over the same period. (SS)
Business News - February 11, 2015