Ref. Ares(2019)1598515 - 10/03/2019
Minutes of the First Meeting of the EU-Indonesia Vision Group
2 December 2010, Hotel Borobudur, Jakarta, Indonesia.
the Indonesian Co-Chairman of the Vision Group, opened the
meeting, affirming that the group should come to a joint vision towards a Comprehensive
Economic Partnership Agreement, 4.1(a) and 4.3
. The delegates of both sides were urged to
leave their nationalities outside the
door and to pool their resources. “We want one team delivering one result and one
.” The joint vision should be formulated in a comprehensive report
eventually to be presented to Parliament. Morning Session on state of EU-Indonesian trade and investment relations.
from the Project Group (EU Delegation, Jakarta) then delivered a
presentation based on a study entitled Trade and Investment between the EU and
Indonesia: Opportunities and Obstacles (IBM).
This focused on problems of access for
EU firms wanting to enter the Indonesian market. The EU was Indonesia’s second
largest export partner representing trade of up to EUR 11 billion by September 2010,
with a considerable trade surplus in favour of Indonesia. Over 700 EU firms are present
in the country having invested a cumulative total of over 50 billion Euros and having
helped to create over 500,000 jobs. The data and results of the IBM data were not
presented in full, s they referred to the period 2005-2007.
Although the EU firms and private sector were concerned at the level of protectionism
and complexity of local regulations he was mindful that Trade Minister Mari Pangestu
had urged a positive outlook and this report had some positive conclusions. The growing
middle class comprising those earning more than $5,000 US dollars per year, and that this
group would reach 100 million people within the next 5 years. The IBM study
emphasised economic stability and continued economic growth despite global recession.
The study, with a main section and five sectoral chapters (on power generation, non-
electrical machinery, consumer goods, pharmaceuticals and telecommunications) put
forward some optimistic projections arising from an anticipated demographic dividend
with Indonesia expecting a young productive population profile, in the context of
continuing economic integration with ASEAN. However, less than optimum inward
investment might leave the country with between 6 and 8% economic growth. Policy
reform might already be opening the way to 7% growth but what was needed to reach the
more favourable scenario of the upper 8% target? The main positive impacts of a possible
agreement with the EU were expected to be upon investment, innovation and economic
restructuring, convergent with these goals.
, also from the Project Group and EU Delegation, then made a presentation
on the main thrust of the more recent Study on Indonesia's Trade Access to the EU:
Opportunities and Challenges, Transtec, 2010, which comprised a main report and five
sectoral studies on areas of higher advantage and opportunity, namely fisheries, agri-
foods, consumer electronics, furniture and cosmetics. This Report focused on the export
of Indonesian products into the EU, and on the sectoral advantages identified and the
supply side constraints holding back the exploitation of these sectors already having high
comparative advantage. However the overall EU market share of Indonesian trade had
actually fallen from 14% percent at the start of the decade to about 10% now, and this
was part of a pattern of relative decline in trade with traditional partners including the US
and Japan. Had the identified supply constraints been addressed, then the report
calculated that the trade income from these sectors in the last decade could have been
28% higher by 2009 compared to the realisation.
Moreover the pattern of trade from developed countries to emerging Asian countries had
changed with a greater emphasis upon commodities (notably palm oil and coal) leaving
Indonesia’s neighbours to take more advantage of processing and value-added. The
conclusion of the report therefore was that Indonesia should put more emphasis in
improving its Export Quality Infrastructure (EQI) system in order to move up the value-
added ladder. Although there had been a lot of improvements on Export Quality
Infrastructure and standards in the last few years, for example via much improved
laboratory facilities, notably in the fisheries sector, these improvements needed
consolidation backed by trained personnel and these facilities needed to be sustainably
extended to the provinces. There needed to be more capacity building, training and
awareness to help these key targeted sectors to take up the market shares as Indonesia has
a competitive advantage in those sectors.
introduced the older but informative report on Trade Sustainability
Impact Assessment of the FTA between the EU and ASEAN(Ecorys, 2007),
concluded that an EU-ASEAN FTA could have made welfare gains worth 1.81% of
Indonesian GDP by 2020, through efficiency and structural gains. The Report predicted
(as of 2007) that gains could be expected to accrue to several key sectors, notably
fisheries, apparel and textiles, while in ASEAN (not necessarily Indonesia) losses could
be expected in gas production and services.
The conclusion from this Report (originally written in a regional context) was that
climbing the value chain was both necessary and a challenge that could be met, that there
would be short-term losers as well as winners, but that the positive aspect of this report
was its emphasis on sustainability, on flanking measures (such as capacity building) and a
comprehensive approach. What the Report also conveyed was that non-trade gains have
become increasingly important and went beyond tariffs to include health and education,
welfare and increased income for households. The Report placed importance on social
sustainability and that economic and trade agreements needed a social base as well as
addressing environmental and sustainability issues.
5. The question as to what kind of analysis was needed to understand the impact of trade
policy on economic growth was posed. In particular in the case of Indonesia could there
be predictable downside results of GDP growth. .
6. Indonesia is making progress and the downside risks are very limited. A new National
Economic Commission has recently been formed by the President, which has been tasked
to form a strategy how Indonesia could leap to a higher level of economic growth. The
effect of the political reform would be expected to improve the Indonesian economy, and
also the economic policy. The economic growth should rely more and more on
manufacturing and there have been some positive signs recently.
7. It was stated that trade policy can make a huge difference as an instrument of
development but it cannot do everything. Trade policy gains are assumed “all things
being equal” and without unexpected events or global financial shocks. What analysis the
Vision Group would need to understand the impact of trade policy on economic growth?
8. EU-Indonesia trade is largely complementary (more so than with Japan or Australia). As
the Vision Group would only meet three times the focus of the discussions need to be
specific and on specific obstacles to EU-Indonesia trade. These obstacles appeared to be
mainly in terms of trade facilitation and less in tariffs.
9. It is crucial for the Vision Group to define the definition of complementarity, since it
would mean there would be no losers.
10. Most of this complementarity in EU-Indonesia lies in services
. Services around products
are key to Indonesia's competitiveness. In the EU competitive products are produced and
are supported by services especially marketing, advertising, insurance and logistics so
that 75% of the EU economy is really about services and 65% of all EU outbound
investment goes into services. For this reason, analysis would be needed for key services
11. It was also said that there is also a need to discuss the direction of economic and policy
reform developments in the EU and the "welfare crisis" that the EU is going through. It is
little known in Indonesia what fundamental reforms and difficult changes Europe has
gone through and that there are "losers" in the EU as well. Indonesia could learn from
how EU has dealt with these "losers" of free trade.
12. Some members
put the emphasis on the importance of trade facilitation rather than tariffs,
the former which appears to be hindering EU exports to Indonesia in agricultural
products. The trade profiles of agricultural products of the EU and Indonesia were indeed
very complementary. There is a need to work together to stress value added products and
to push Indonesian production up the value chain,
13. Since the Vision Group would use these studies as the basis for policy-making it should
be aiming for mutual growth. The FTA with Japan is an agreement where conflict of
interest was relatively small. The Consultants were urged to look at the dynamic effects
of other FTAs and he wanted more than the same analytical approach as usual and to
contrast business as usual with the impacts of previous FTA implementation.
14. 4.1(b) and
declared that EU-Indonesia economic relations have entered a new chapter. All
stakeholders should work hard together to catch the momentum after the EU-Indonesia
Business Dialogue (EIBD) and the Vision Group was encouraged to reflect upon how its
recommendations would be followed up. The seven policy recommendations of the EU-
Indonesia Business Dialogue (EIBD) should be taken into account by the Vision Group
(focusing on opportunities, exploring possibilities of a CEPA, formal consultations with
business of both sides, regulatory cooperation, cooperation and technical assistance,
cutting red tape and the investment climate). The need for infrastructure was also
emphasised, especially roads, ports and power plants, and for more formal and clear
mechanisms whereby 4.1(b) and
could facilitate government-private sector cooperation in
Indonesia especially with focal points in the Ministry of Trade and BKPM (the
Investment Coordinating Board). The Vision Group had access to extensive paperwork
and studies. A Pilot Project could become a locomotive to push forward these issues and
priorities. Such a
Pilot Project could follow on after the work of the Vision Group. This
does not need to be a physical project but could be based on a more pragmatic approach
to bring about “islands of success” on policy and regulatory reform. There is a need to be
specific and concrete if a possible agreement would gain support from the political side.
It was concluded that the recent EIBD recommendations presented concrete points and
solutions to be taken on board by the Indonesian Government and the EU. There needed
to be a clear plan for dialogue between business and government on both sides.
15. The European side agreed that the level of dialogue had never been better and that EIBD
had been very constructive. EuroCham's position papers were distributed to the Vision
Group members, giving concrete recommendations in 14 sectors. Among those, the acute
need for dealing with physical barriers was highlighted, e.g. infrastructure, in Indonesia,
simplification of licensing and other administrative processes and dismantle barriers in
services sectors (e.g. postal and horticulture laws). There is also a need to discuss the
direction of economic and policy reform developments in the EU which faced many
internal problems. It is little known in Indonesia what fundamental reforms and difficult
changes Europe has gone through and is now facing. On the Indonesian side there was
need for a better coordinated plan on how to promote Indonesia in Europe, with better
coordination between different Ministries and agencies. The consultation groups
recommended by the EIBD could be one way of helping overcoming some issues and
support better coordination between government agencies.
16. Other members agreed the need to be very practical. In particular Indonesia needed
infrastructure, while the EU needed exports and jobs. How could these two issues be
brought together? The financial sector was also important in this regard. Access to
financing for SMEs is limited in Indonesia today despite sufficient there being sufficient
capital available because financial structuring issues were not being addressed.
Local companies could somehow benefit from poor infrastructure which they could
navigate better while inward investors were at a disadvantage. EU efforts and resources
could be deployed in a more effective manner, for instance through a working model on
EU-Indonesia infrastructural cooperation that could compete with China, Korea and
17. Some members that at the moment Indonesia is giving somewhat conflicting signals to
foreign investors. The Vision Group should give a vision on how to attract investors, in
particular for Indonesia to deal with legal certainty and the incentives to invest in
Indonesia, such as FDI ownership limits. This could be done through regulatory reform,
better investment conditions and changes in fiscal policy. Despite these problems a push
forward was favoured and leading to a conclusion how the group could unite around
concrete recommendations that can be applied in a political and institutional context. It
was concluded that proposals by the Vision Group should be done in a constructive
manner focusing on solutions.
18. EIBD put all priority issues on the table but the question is if it would lead to more
investments from the EU? 4.1(a)
To move forward we needed regulatory and
bureaucratic reform and a push towards the green economy. The issue of access to land
for development projects need to be properly addressed in Indonesia. 4.1(a)
19. It was concluded that it was right to raise the "hard issues". While the Vision Group
should be critical and put all the problems on the table but find solutions to those
problems and show the likely impact in case of action and no action. "The Vision Group
should be friends of the EU and friends of Indonesia".
20. The view that the real variable affecting Indonesian penetration of EU markets was the
variation in GDP of EU Member States was put forward, which seemed to be the main
determinant of demand for Indonesian goods. As European companies are more
competitive, there would be potential losers in Indonesia of an agreement so that there
needs to be a clear communication of facts underpinning the benefits. It was also noted
that most of the bilateral trade is dependent on the EU economic growth patterns –
meaning that the EU GDP is a push factor for trade and Indonesia's growth does not act
as a pull factor. It was furthermore said that Indonesia needed continuing help to improve
trade quality infrastructure, customs regulations and management, port efficiency and
clear bottlenecks in the way of inward investment. It wasnoted that the EU was good on
infrastructure and water supply and that Indonesia really needed help in these areas,
especially to prepare ideas and project proposals that would meet EU requirements and
specifications. Capacity building was key for Indonesia to benefit from a closer trade and
investment cooperation (especially in respect of infrastructure, customs, port services,
laboratories). The country needed many more small planes to connect provincial hub
airline centres, more investment in inter-island connectivity, especially by sea (ports and
ships) and air. The EU and Indonesia should showcase such proposals and prepare
feasible projects so that they fit European interests for instance at exhibitions and trade
fairs in EU countries, and invite EU investors to Indonesia. An innovative approach to
these activities with a clear timeframe was encouraged.
21. It was
argued that there was an on-going transformation under way making progress on
infrastructure, logistics and supply constraints. Therefore, the Report should make
specific recommendations with time lines linked to them and that priorities for a CEPA
should cover the needs of SMEs and for improvements in standards. The great benefit of
a well conceived CEPA could act as a justification to push forward domestic reform in
22. The Group should not consider one party losing or winning. The Vision should focus on
liberalisation of trade in goods, services and investment and related to trade facilitation
on standards compliance and customs issues. Agreements have in today's climate been
imperative if a country does not want to be discriminated in another market. Innovative
elements in the recommendations of the Vision Group are important and that the Group
should bear in mind that the main purpose of the Vision is to upscale EU-Indonesia trade
relations and not restrict itself so that issues would have to be brought up at a later
23. Several members
urged that the group look at the way the Japan FTA was structured in
terms of commitment to capacity building and it was decided a short summary of these
supportive measures would be useful. 4.1(a)
EU has to compete
with trade approaches that were strongly backed by governments, as in the case of China
on the 10,000 MW accelerated electricity programme. The work of the group should help
prepare for how to react to downside impacts affecting negative economic sectors in the
context of an FTA and to help ensure that these downside impacts would be properly
addressed. The group should look at potential negative impacts sector by sector. A quick
resolution of a possible agreement due to elections approaching in 2014 was favoured.
24. There should be a lot of cooperation included in a potential agreement. The growth of EU
trade with Indonesia has been lower than with other countries.
25. Fair rules on public procurement are important for the EU – not solely looking at the
lowest price, in order to get the best value for tax payers' money. The banking sector in
Indonesia is not conducive, particularly not for SMEs, as credit rules are too strict.
26. It is crucial that the Vision Group performs an impact analysis for sector by sector to
explain the benefits of an agreement to the business sector.
27. Competition is beneficial for economic growth. This is however rarely discussed in an
FTA context. Any analysis should focus on opportunities, for which hard analysis is
needed. Protectionists will not listen but there is some scope for influence. With which
countries should Indonesia compare itself? i) ASEAN and ii) BRICS might be relevant.
What reforms are needed if Indonesia wants to catch up with those countries?
28. Green development and sustainability issues should be seen as a competitive edge and
not as a cost. Scientific cooperation between EU and Indonesia is needed to deal with
environmental issues. Further progress in green energy is desirable, for example
geothermal projects, and for power plant from EU countries, creating opportunities for
sustainability and for EU firms.
29. Implementation remains an issue in the reform process in Indonesia. For instance the
experience of the Ministry of Fisheries where the assistance and support programmes
from the EU had helped deal with export standards and quality issues by strengthening
export infrastructure, especially laboratories.
30. It was argued that losers might lose anyway with or without an agreement – but how to
tackle them? There would be losers in the short-term but these become winners in the
long term. The importance of flanking measures was stressed. Effective implementation
and political commitment are key to successful reform and that Indonesia was benefiting
a lot from its regional positioning with ASEAN (in terms of development towards an
FTA and economic community). How far and how fast Indonesia could move further in
this direction and towards BRIC status? Is Indonesia willing to become a BRIC and how
to get there?
31. In the context of the state-oriented economic structure of Indonesia it would take time to
make further progress but that in terms of openness the economy was already one of the
most open in the world with little emphasis on tariff barriers, plus special economic
zones. It was furthermore pointed out that Indonesia is already a part of ASEAN regional
32. Trade policy has a large effect on economic gains, which is often forgotten. Trade
facilitation requires relatively little efforts whereas the gains can be large. Indonesia
needs a common vision if it is to be connected globally, not its own national vision. It
was presented that the logic of the new EU trade strategy included how to deal with
losers. Studies by ADB and others gave useful lessons on economic analysis in relation to
FTAs but there is no need for an overdose of analysis rather than having a clear view of
the main issues. For example ADB data made it clear that perhaps 50% of exporters in
different countries did not make full use of FTAs perhaps because of lack of awareness,
or sticking to what they knew and using GSP provisions instead. Any FTAs have to be
used by traders and properly implemented. As Minister Mari Elka Pangestu had said it
came down to understanding global value chains and getting involved in them to your
advantage. Trade data did not always get at these issues and that it was necessary to look
at data arising from the analysis of what happens when value added can be acquired.
Value added analysis was not the same as trade analysis, and value added was a very
Afternoon session on different models for bilateral arrangements
introduced a session on different types of bilateral agreement, and their different
characteristics, by presenting a short typology of FTAs and their different effects and
impacts. The EU has launched its new trade strategy and this looked at what trade policy
could deliver to an economy. These days trade policy could deliver progress towards a
greener economy and smart growth and greater competitiveness. The EU now aimed
using this strategy to promote a 1% increase in its GDP per year, which did not sound
much, but amounted to 150 billion Euros per year, representing average consumer gains
of EUR 600 per person and year due to a wider and cheaper choice of goods. 4.1(b)
furthermore stated that 14 million workers in the EU depend on exports and 36 million
workers are someway or the other linked to trade. A modern trade policy is therefore an
important instrument for development. As openness to trade went up unemployment
decreased, and vice versa.
He noted the EU trade policy follows a three-thronged approached: multilateral
agreements (WTo/DDA), bilateral agreements and autonomous agreements (like the GSP
and EBA – which offered unilateral preferences). EU FTAs have three different
rationales: preparing for EU membership, enhancing relationships with neighbouring
countries, and development (in the case of ACP countries and reciprocal market access,
i.e. promoting competitiveness on both sides. Shallow FTAs have mostly included tariff
reduction in goods, whereas deep and comprehensive FTAs also included government
procurement, competition policy and technical barriers to trade. For the EU the home
market is still important (intra-EU trade is twice as big as external trade) but global value
chains are key. EU exports depend critically on imports as more than two-thirds o EU
imports are intermediates. He also showed the negative impacts of lack of competition on
domestic markets and price fixing – for instance that developing countries imported more
that US$ 81 billion of goods from industries affected by price-fixing conspiracies in the
1990s, leading to US$ 20-25 billion in excess consumer prices. A comprehensive FTA is
more beneficial as removal of tariffs in goods is not sufficient to fully realise gains of
trade liberalisation and in some cases tariff removal is not enough to give a balanced
outcome for every partner.
In Asia, FTAs are on the rise and Singapore, China and India sticks out with relatively
numerous cross-regional FTAs. Most countries favour a WTO+ approach in their FTAs
while China and India generally seems cautious to conclude very comprehensive FTAs.
Economic impact of an FTA could lead to two different effects: i) trade creation:
inefficient domestic products are replaced and ii) trade diversion: low cost imports from
non-FTA countries are replaced by inefficient imports from FTA members.
There are different models to assess the impacts of FTAs. The Computable General
Equilibrium (CGE) model gives the bif picture of dynamic effecs in the long and short
term, efficiency gains and demand factors. The Partial Equilibrium Models has a greater
emphasis on sectoral approaches. There are also econometric and gravity models. Partial
eqiuilibrium did not calculate efficiency gains and econometrics approaches were aimed
more at new areas of trade, services and non tariff barriers.
Deep integration is important in an FTA context. The deep bilateral relationship between
the EU and Japan put more emphasis on non tariff barriers (NTBs) where the gains on
both sides are more than double and more mutually beneficial than without considering
dismantling non-tariff barriers.
Looking forward, the need for good economic analysis is useful in assessing trade policy
options. Comprehensive agreements produced the most benefits for the wider economy.
Trade policy around the world is in motion and others are moving.
then introduced an overview of Bilateral and Regional FTAs of
Indonesia.; The Vision Group had been provided with an overview of concluded
agreements or agreements under negotiation, and that some of the agreements would be
analysed in more detail for the next meeting of the Vision Group. The table would also be
complemented with a short text describing the agreements. An overview of the
agreements can be found in the presentation forming an integral part of these minutes.
continued to present the FTAs concluded or under negotiation by the
EU. The FTAs already concluded cover 22.3% of imports and 27% of exports. Another
20% of imports and 26% of exports are currently under negotiation. When concluded,
44% of EU imports and 53% of exports would be covered by FTAs. The EU has many
types of FTAs:
¾ Customs Union
: with Turkey and EFTA countries.
¾ Stabilisation and Association Agreements
: include country specific issues,
including political issues, capital movement; legislation and justice affairs. These
are agreements for candidate and potential candidate countries for EU accession.
¾ Economic Partnership Agreements
: regional agreements for former colonies in
the ACP countries. As of now, EPAs have been concluded with the
CARIFORUM countries and with the remaining countries there are interim
agreements in place. The EPAs are motivated by development objectives and are
less relevant from a trade perspective but more out of a development perspective.
: Including economic and political stability
issues. The agreements mainly cover industrial goods, NTBs as well as social and
¾ Commercially oriented FTAs
(competitiveness FTAs): Have been concluded
with countries such as Mexico, Chile, South Africa and are under negotiation with
MERCOSUR. The liberalisation is mostly in agricultural goods but they are also
covering services, investment and competition.
¾ New generation FTAs:
These deep and comprehensive FTAs go beyond WTO
and include IPR, public procurement, competition, sustainable development.
Examples include South Korea, Singapore, India and Malaysia (under
negotiation), Peru and Colombia.
furthermore posed some questions for reflection by the Vision Group:
¾ How can regional and bilateral FTAs be compared?
¾ What are good elements to integrate in a potential agreement?
¾ What lessons have been learnt from the processes of previous FTAs for both sides?
¾ How can the strategies of the two sides match?
36. Following this presentation, a major discussion on what is meant by the concept of deep
and comprehensive FTAs – if these concepts need to go together or if they can be seen in
isolation?was launched. Some CEPAs did seem to include cultural and political as well as
economic issues and should that be included in the vision as well?
37. Calculations of benefits of growth in trade should not only focus on employment but also
diversification of products
, which is an important issue in Indonesia. In terms of
are also important. Indonesia already has a competition law and does
a potential agreement mean that the competition policies
of Indonesia and EU have to be
harmonised? Finally, it is important for Indonesia to maintain benefits from the GSP
throughout a possible negotiation process, and it should be extended to GSP+.
38. The EU had one single unified competition policy and also state aid is included in this
policy – thus there is a lot to be gained by SMEs. SMEs are not only important in
Indonesia, but also very vital in the EU. Regarding the design of FTAs and CEPAs there
was no simple model to follow but all elements are important to consider in an FTA
context as they are interlinked. In preparation for FTAs, the EU talks closely to the
industry on which barriers are the most significant and which can be quantified. However
EU experience and its new competition policy stressed a strong link between mobilisation
of inward investment (FDI) and services, and also prioritised SMEs as key stakeholders
whilst recognising their systemic weaknesses. Signing an FTA/CEPA also did not rule
out using previously gained trade benefits like GSP. Although new FTAs were usually
more comprehensive than the GSP, some companies still preferred to utilise the benefits
and systems they understood, rather than new ones. For example in Japan surveys
showed that 30% of companies did not yet understand what was available to them under
the new EU-Japan bilateral agreement. Thus, awareness building is crucial in any FTA
process. An FTA is only one part of a new relationship and that trade facilitation and
capacity building are also vital to a new approach.
39. It was added that social, political and cultural aspects are more relevant in a Partnership
and Cooperation Agreement (PCA) context. Any comprehensive economic agreement
should for the EU's interests include tariffs, non-tariff barriers, services, IPR (including
TRIPS+ on agricultural products), technical assistance, investment, competition policy,
public procurement (also at decentralised level). The example of automobiles was given,
which is a traded good to be covered by a Trade in Goods (TIG) agreement but that this
actually involved also Trade in Services (of TIS). Making and selling cars involves
design, engineering, management, financing, insurance, logistics and advertising and
these all contribution to the production, distribution and value of cars. Hence trade in
goods becomes inseparable from trade in services. IPR is essential to give comfort to
investors and that TRIPs represented a minimum standard to be attained under WTO
40. TRIPS+, Rules of Origin (RoO) ans sustainability issues should also be features of any
41. What stops investors from investing in a particular country? In particular if the legal
system did not work then contracts were unenforceable. This aspect would need to be
handled in a comprehensive agreement.
42. A dialogue could help to strengthen the legal framework.
The legal system in Indonesia
might be slow but it is working and improving.
43. There is a difference in the definition of SMEs in Indonesia and the EU. There needs to
be a clarification on the concept of Corporate Social Responsibility (CSR), since this is a
legal requirement in Indonesia.
44. Although the Vision Group should not become negotiators of an agreement, there needed
to be clarity on definitions used in the report, such as on SMEs, CSR and
comprehensiveness. Facilitation and cooperation would enable both sides to benefit from
a comprehensive agreement.
of RELEX (Directorate General of External Relations of the European
Commission) explained the background to the bilateral Partnership Cooperation
Agreement (PCA) between the EU and Indonesia. This bilateral PCA is the first of its
kind that the EU has signed with an Asian country. It was signed in November 2009 after
negotiations since 2005. Four countries (Denmark, Poland, Latvia and Estonia) have
already ratified the PCA and hopefully all 27 EU Member States would follow suit
during 2011. In addition, the PCA has not yet been ratified by. In Indonesia it was not yet
clear if the PCA would have to be ratified by a Presidential Decree or the House of
The PCA is regarded as the political base towards the negotiation of an FTA. The PCA is
really a preferential political relationship which provides a legal framework and political
basis for future cooperation in a wide range of areas including climate change, energy,
maritime matters, narcotics, organised crime and corruption, human rights, counter-
terrorism, regional political cooperation, weapons of mass destruction, intellectual
property rights (IPR), sanitary and phyto-sanitary standards (SPS), international
standards, customs administration, investment and services (covering more than 50
topics). This also provides for a dynamic relationship between the private sector and
then provided an overview of current EU economic cooperation activities
with Indonesia including the new Trade Support Program II, aimed at supporting Export
Quality Infrastructure in Indonesia. This programme should help Indonesia improve
product standards and quality in order to better access the EU and other developed
markets, which should help Indonesia benefitting from any potential agreement. The
programme amounts to EUR 15 million and has already started with its policy
component, whereof the first topic is the study presented in the morning on Indonesia
trade access to the EU. Another study is also in the making mapping out the EQI system
in Indonesia and giving recommendations for improvement. In addition, the EU is
starting Trade Cooperation Facility in 2011, which is a demand-driven facility aimed at
improving various trade and investment issues in Indonesia such as IPR, trade policy
analysis, domestic trade, science and technology, energy planning and investment
facilitation. The TCF amounts to EUR 12.5 million during five years. At the moment, the
TCF is awaiting the approval of the financing agreement by the Indonesian Government,
which is delayed due to one government agency not having decided about their
participation in the programme. The TCF is also complemented by a civil society
component of EUR 2.5 million, aimed at strengthening business associations and NGOs
in their role as giving input to government policies and providing services to their
members. KADIN could be one of the beneficiaries of such a programme. In the
presentation it can also be seen that the EU also gives substantial support to ASEAN
economic integration through various regional cooperation programmes dealing with
inter alia product standards, IPR and various economic policy issues. Regional
cooperation programmes and cooperation programmes offered by EU Member States
should also be taken into account when looking at the total picture of EU support to
Indonesia. The issue was – what else would be needed in support of an FTA? In fact EU
support could come by at least four different modalities including trade support funds via
ASEAN, from EU Member States from the EU Commission (DEVCO) or from
multilateral agencies (ADB, World Bank etc.) which have been funded by the EU.
Participants expressed interest in the accessibility and usability of such funds and the
effectiveness of use in support of trade support measures and activities.
47. It was expressed that the technical support requirement of an FTA should be additional to
and on top of any trade support already in place or planned. Capacity building should
cope with both losses and gains, and other aspects of implementation should all be
additional to any programmes already in place.
48. The Vision Group should look at the working of the Indonesia Japan bilateral agreement
which had included capacity building.
Main conclusions by the Co-Chairman and issues for follow-up.
as Vision Group Co-Chairman then pulled together some of the
suggestions and ideas emerging from the day’s discussion. He concluded that the group
needed more solid understanding of some issues and suggested that the members of the
group should help elaborate the way forward. 4.1(b)
said that in the context
of a wider CEPA we would need mechanisms to manage our bilateral relationship. He
suggested the following issues for follow-up and papers to be produced by the Vision
Group members to the Chairs, in a short and brief format (1-2 pages):
to describe the capacity building component of the Indonesia-Japan
EPA as a model for a potential agreement with the EU.
should seek to clarify what are
the major hurdles regarding sanitary and phyto-sanitary measures
(SPS) on both
to specify what could be included in the concept of a
“comprehensive” CEPA and how to structure an effective dialogue mechanism
between Government and KADIN. The Project Group proposes that also 4.1(b)
is involved in this work.
were tasked to address infrastructure
recommendations arising from the EIBD, in particular focusing on Public Private
Partnerships A brief guideline should be produced depicting a model as to how
infrastructure projects could be prepared to attract EU investors, including financing
(5) That 4.1(b)
should look at measures to attract EU
investors to come to Indonesia, with a focus on the five priority sectors in the
Transtec Report (fisheries, agri-foods, consumer electronics, furniture, natural
cosmetics), also those in the IBM Report (power, machinery, consumer goods,
pharmaceuticals and telecom).
were tasked to look at the issues arising from the
liberalisation of trade and services and especially with ways of identifying and
dealing with potential losers
(both goods and services). 4.1(b)
DG Trade that he might assist in this area with some of the analytical work.
should look at communications strategies and communication with
wider stakeholders with a view to identifying ways and means for dialogue to
mobilise support for a potential CEPA between Indonesia and EU.
should deal with trade and investment regulatory reform and
a possible pilot project for trade and investment regulatory reform, in cooperation
to produce a one page summary of EU's support to Indonesia in the
education sector, including ERASMUS-MUNDUS scholarships in higher education.
Furthermore, the Co-Chairman suggested:
(1) That the working dates for the next VG meeting in Europe should be on the 22-23
, probably with the VG meeting on Wednesday 23 February and
possible meetings with high level officials from the European Commission to be
explored the day before. All delegates noted this date.
(2) That working documents should be completed by 1 February 2011
at the latest so
that the Project Group could finalise draft preparations on 11 February
and the Co-
Chairmen could review all the papers to be distributed to the Vision Group members
on 15 February