The Seventh Trade Policy Review of Indonesia Opening Statement of The Government of Indonesia Geneva, 9 December 2020

December 9, 2020 Trade/WTO

Thank you, Mr. Chairman.

Excellency Ambassadors and Distinguished Delegates,

1. Good morning to all of you.It is a great honor for me to be here today to lead the Indonesian Delegation to the Seventh Trade Policy Review, which will continue the day after tomorrow. My name is Jerry Sambuaga, the Vice Minister of Trade of the Republic of Indonesia, and I am tasked by my Government to lead the Indonesian Delegation to this important meeting in view of current national, regional and global economic contexts.

2. As all of us may observe, preparing, and holding a Trade Policy Review this year takes a lot more time and energy than we all may have expected. This is due to the challenges brought about by the Covid-19 pandemic which have created new pressures on member states under review, particularly in terms of pursuing internal coordination amongst relevant agencies in times of Covid-related lockdowns and restrictions, and in term of coordination between Members’ capital and Geneva.

3. On that note, the Indonesian Delegation wishes to convey its high appreciation to you, His Excellency Ambassador Harald Aspelund, Chairman of the Trade Policy Review Body, for providing guidance and leading this policy review process. Our sincerest thank also goes to His Excellency Ambassador Ángel Villalobos Rodríguez of Mexico for taking up the task as our discussant. Last but not least, we would like to convey our gratitude to the WTO Secretariat for working closely with Indonesia’s Task Force so that both the Secretariat Report and the Government Report could be completed in time.

4. Before I begin with the more substantive points, Mr. Chairman, my Delegation wishes to extend our condolences to the Member States who have experienced natural disasters, and to anyone who is suffering from Covid-19 and has lost loved ones or friends to the pandemic. I hope that all delegates and their families are healthy and coping well in this time of trying.

Mr. Chairman and Distinguished Delegates,

5. The global economy has evolved enormously since Indonesia’s last Trade Policy Review in 2013. Disruptions spurred by Industry 4.0 continue to pose a new challenge to us. Trust deficit in the multilateral trading system continues to cause adverse domino effects on ways Member States of the WTO engage with each other. These include, among others:

  • continued if not the deepening and further expansion of trade tension between two major economies and its impacts on other countries;
  • increased trade barriers and the use of trade remedy measures;
  • “tit-for-tat” approach to economic relations, which may put aside the incentives for international cooperation;
  • a tendency toward punitive plurilateral actions; and
  • the proliferation of bilateral trade agreements.

6. We have witnessed a continued slowdown in global trade in recent years, only to be aggravated by the spread of the Covid-19 pandemic, which has caused an unprecedented impact on the global economy and trade. It is against such a backdrop that I wish to provide an introductory remark to our Government Report before us to better understand how our economy has evolved since 2013.

7.  Despite the continued presence of global challenges throughout the review period, Indonesia has ensured solid growth and sustained development. The resilience of Indonesia’s economy is a reflection of its relatively strong fundamentals and sound macroeconomic policy.

8. During the review period from 2013 to 2019, Indonesia’s annual average GDP growth rate stood at 5.1%. In terms of value, Indonesia’s GDP per capita increased from USD 3,531 in 2014 to USD 3,927 in 2018, which is equal to the GNI per capita of USD 3,820. We managed to keep the poverty level at a low single-digit of 9.82% in 2018, on account of our effective poverty alleviation programs.

9. As shown in Chart 2.3 in our Government Report, we managed to keep the inflation rate within the target of 3% ±1 between 2015 and the early months of 2020. Higher inflation rates were recorded in 2013 and 2014 due to the increase in energy prices caused by a strategic measure taken by the Government to reallocate energy subsidies to infrastructure development and social programs. This, amongst others, has allowed the Government to lower the unemployment rate from 5.94% in 2014 to 5% in 2019.

10. Some economic achievements I mentioned earlier are the resultants of policies and measures taken by the Government of Indonesia to improve the eco-system in time of continued challenges in the world economy. These policies and measures include the improvement of investment climate, enhancement of industrial competitiveness, upgrading of logistics efficiency, promotion of tourism, and strengthening the people’s purchasing power. It should be underlined that domestic demand and government procurement have been the main driving forces in our economy in response to changing external conditions.

Mr. Chairman and Distinguished Delegates,

11. It is not included in our report, but allow me to refer to the World Bank Doing Business Reports between 2014 and 2020 for us to understand more about how Indonesia’s economy evolves during the Review Period. The Ease of Doing Business Reports on Indonesia suggests that we managed to improve our rank of overall index from 120 in 2014 to 73 in 2020. We continue to believe that there is plenty of room for Indonesia to make further improvements. Two out of 10 parameters will be given special attention for significant improvements in the near future. They are “dealing with construction permits” and “trading across borders.” Let me touch on these two parameters briefly.

12. On “dealing with construction permits,” we see the need for better policy coordination between the Central and Regional Governments to address the issue. This is particularly the case as Indonesia adopts a decentralization policy to allow regional governments to make decisions on some economic policies so as to ensure that they fit specific regional settings on the ground. However, as the economic challenges continue to become more complex both at the central and regional levels, the Government should do something about it to resolve the persistent problems.

13. On “trading across borders,” one should not lose sight of the external environment within which our economy operates. Earlier I mentioned the growing tendencies toward raising trade barriers, the “tit-for-tat” approach in international trade, more resort to trade remedy measures, and unilateral actions. This is not to mention an increased trend toward the adoption of new standards which, in some cases, is questionable whether they are based on a genuine consideration of protecting human health and life, or they have something to do with stiffer competition in the markets.

14. This is not to say that it is fine for Indonesia, or any other country on that matter, to just follow the trend of raising barriers. Indonesia will address the issues, but we hope that others also do the same in order to restore confidence in international trade. It takes “two to tango” if we are to make difference in the multilateral trading system.

15. If I could quote our President’s assertion after the signing of the Regional Comprehensive Economic Partnership or RCEP on 15 November 2020, “Indonesia is for an open economy.” Our President did not categorically talk about “liberalization” but, rather, about opening our economy in a fair and win-win manner. I believe this is a key to understand where Indonesia is heading to. This explains why Indonesia continues negotiating trade agreements with like-minded countries, big and small, in our quest for a better position on the global trade map; a better place in the global value chain which is being confronted now by more centripetal forces than centrifugal ones.

Mr. Chairman and Distinguished Delegates,

16. While continuing to support the multilateral trading system by participating actively in discussions in the WTO as illustrated in paragraph 3.4 of our Government Report, Indonesia also has been quite proactive in pursuing regional and bilateral trade negotiations which—we believe—can serve as the building blocks in support of a stronger multilateral trading system.

17. Within ASEAN, Indonesia has been active to work with other nine ASEAN Member States to implement the ASEAN Economic Community Blueprint 2015 – 2025. With nine ASEAN Member States, we are also an active party to review and improve the existing ASEAN Plus One FTAs with ASEAN’s six trading partners.

18. Bilaterally, we are in the process of upgrading Indonesia’s Preferential Trade Agreement with Pakistan and the Economic Partnership Agreement with Japan. Indonesia is working with Chile now to start bilateral negotiations on trade in services and investment to complement our already-entered-into-force bilateral trade in goods agreement. We have entered the implementation stage of our Comprehensive Economic Partnership Agreement with Australia while in the final process of ratifying our Preferential Trade Agreement with Mozambique and Comprehensive Economic Partnership with EFTA countries.

19. Further on the bilateral front, we are in the process of negotiating trade deals with the European Union, Tunisia, Turkey, Bangladesh, Mauritius, and Morocco, while planning to sign the Comprehensive Economic Partnership Agreement with Korea very soon this month. We also have initiated exploratory talks with other countries in Africa and South Asia as well as groups of countries like the Eurasian Economic Union, MERCOSUR, and members of the Gulf Cooperation Council.

20. All this is not to mention the recently signed Regional Comprehensive Economic Partnership or RCEP Agreement amongst its 15 participating countries. Indonesia has been the initiator of the RCEP concept and played a key role in the negotiation process as the ASEAN Country Coordinator for RCEP Negotiation, and in chairing the RCEP Trade Negotiating Committee.

21. The point my Delegation wishes to make is that Indonesia continues to reform the economy. Basically, we can do it in two ways. We may do the reform by ourselves, deciding on the parameters and targets by ourselves, then proceed with the reform. Instead, we opt for doing it in parallel with negotiating some economic deals with our trading partners in order to get the bonus; that is, better market access and more investment.

22. On the latter, it is worth mentioning that we are not only inviting in-bound investment but also promoting out-bound investment. Between 2014 and 2018, about 51 Indonesian companies established their overseas investment, including in ASEAN and other countries such as India, China, Saudi Arabia, Nigeria, and Australia. These investments were established in various sectors, among others in constructions, software, IT services, financial services, and pharmacy. Our business also made a big investment in Nigeria, Canada, some European countries, Ecuador, and others in such sectors as food, pulp and paper, biofuel, and Spa.

Mr. Chairman and Distinguished Delegates,

23. Back to “behind the border,” in the context of creating a more conducive environment for business, the Government introduced the online processing platforms for investment and business licensing procedures in 2018. Much earlier, we had established Indonesia’s National Single Window to facilitate exporters and importers to do the on-line mandatory processing for their export and import activities. On this platform, we also added Indonesia’s Trade Repository—an authoritative source of information relating to exports and imports. And of course, in line with our commitment under the WTO Trade Facilitation Agreement, we have established Indonesia’s Trade Facilitation Committee to ensure the timely provisions of our commitments under the Agreement.

24. To peel the onion a little bit, in 2017 Indonesia established the Indonesia TBT National Committee to ensure better coordination on TBT issues with all stakeholders. The Committee is tasked to observe the effective operationalization of the principle of transparency enshrined in the WTO TBT Agreement.

25. All this brings me to what we consider as a very important point in the context of Indonesia’s Trade Policy Review this time.

26. On 2 November 2020, the Government enacted the so-called Omnibus Law on Job Creation. This is a direct response of our Government to the many concerns raised by the private sectors—national and from other countries—on the uncertainties and high-cost economy they have been facing for years in, and with, Indonesia.

27. In a nutshell, the Omnibus Law focuses on nine broad areas and two implementing arrangements. These nine broad areas cover the followings:

  • improvement of investment eco-system
  • simplification of business permits
  • employment and job creation
  • support for micro, small and medium enterprises;
  • ease of doing business
  • research and innovation
  • land acquisitions
  • economic zones, and
  • establishment of the Sovereign Wealth Fund as well as  the acceleration of strategic national projects

28. The two implementing arrangements I mentioned earlier are on, first, the administration of the Law which includes Good Regulatory Practices; Service Level Agreement; Norms, Standards, Procedures, and Criteria; and digitalization of government services. The other arrangement is on sanctions.

Mr. Chairman and Distinguished Delegates,

29. In response to a total of 890 questions we received from the Member States as of 8 December 2020, we intend to provide rather general yet meaningful answers for Members to get better understandings of where Indonesia is coming from and which direction we are going to. We may not be in the position to provide detailed responses in time as Delegates may expect, and this is due to the fact that around 19 ministries are now in the process of drafting the implementing regulations which should be completed within 90 days after the official adoption of the Law on 2 November 2020.

30. Nevertheless, we will do our best in terms of providing adequate responses to all questions, and in parallel taking them as inputs to the making of implementing regulations of the Law.

31. To conclude, Mr. Chairman and Delegates, I wish that this Trade Policy Review will be of particular benefits to Members and Indonesia as we would like to contribute positively—however little it maybe—to the restoration of strong confidence in the multilateral trading system which should allow an open, fair and predictable trade environment for all Members of the WTO.

I thank you, Mr. Chairman.