Walter van HattumEU Delegation to Indonesia, Brunei Darussalam and ASEAN

Indonesia and the EU:A unique partnership with prospects

Content

1. EU trade policy

2. EU and Indonesia: Vision

3. And how to go about it?

2

EU Trade Policy

EU a trading power…

15.5 % of world trade (in goods) in 2011

First exporter

14.9% (2011)

Largest importer

16,1% (2011)

EU-27 received €103.9 bn in FDI 2010(ranking 2nd after US €172.2 bn)

4

So why trade more?

• More trade means more economic growth• Trade means more jobs• Trade helps reduce poverty• Trade and Investment support new ideas and

innovation• Trade brings people together and secures

economic ties between nations• Trade and investment boosts competition

and competitiveness

Being the leading trade regionStrong interest in: Open markets Clear regulatory

frameworks

Responsibility towards: EU citizens Rest of the WorldNeed to reinforce EU

competitiveness on world

markets

6

EU Trade policy

• Create a global system for fair and open trade• Access markets for European companies, their workers and investors• Make sure others play by the rules• Ensure trade is a force for sustainable development

More than trade?

• Trade is no longer just about tariffs…- Standards- Licensing practices

• Trade is not just about trade…- Environment - Human Rights- Labour Rights

• Trade supports sustainable development…

Does it result in development?

Trade-induced growth should be accompanied by other development measures:

– Improving workers skills and educational levels– Investment in infrastructure– Environmental protection– Strengthen safety nets

How does it work in practice?

• Provide developing countries with better access to EU market

• Promoting EU direct investment towards developing countries

• Strengthen trade and investment capacity in developing countries

• Support development of physical and social infrastructure enabling sustainable trade

• Generalised System of Preferences (GSP)

• Trade Agreements (Free Trade Agreements, Comprehensive Economic Agreements)

• Aid-for-Trade (US$ 10 bn)

• Other development aid

EU and Indonesia: Vision

Indonesia and the EU: A unique partnership with prospects

EU and Indonesia: Vision

Indonesia: the new tiger?

Strong economic fundamentals - young population, growing middle class ($3000, 40 M at $6,000+)

Sound economic policies and growth - 6.4% despite crises, inflation 4.6%, debt at 25%; reserves at USD 110 billion, limited budget deficit and investment grade

Stable politicsAnd yet only EU’s 35th export partner and

only 1.6% of our investments

And the EU?

• Common market of 27 countries (soon 28!)– 17 countries use the same currency– World’s biggest market – Population 500 million – Over 20% of the world’s GDP – GDP $15 trillion – GDP per capita $ 30 000 – 16% of world's trade– World’s largest importer of food! – But Indonesia only 22nd largest importing partner

Some facts – Trade 3rd largest Indonesia surplus of US$ 8 billion

Not just short term! Indonesia gains US$ 8 billionIndonesia's export to the EU (billion euros)

02468

1012141618

The EU export to Indonesia (in million euro)

0

1,000,000

2,000,000

3,000,000

4,000,000

5,000,000

6,000,000

7,000,000

8,000,000

9,000,000

Some facts – Investment 2nd

FDI to Indonesia from the EU (million USD, BKPM)

821

1872

1019

1973

2777

2200

2800

0

500

1000

1500

2000

2500

3000

2006 2007 2008 2009 2010 2011 2012*

1.1 million people directly employed by EU companies

Investment: 2nd largest but underperformingPotential? Trade and Investment

Vision Group: towards a CEPA

• Trade is complementary (we don’t make the same stuff) and in Indonesia’s favour ($8 bn surplus)

• CEPA targets investment as much as trade – already a major investor, CEPA will realise the true potential of EU FDI - a win-win for IDN (jobs, growth and tech transfer)

• CEPA’s construction is not like the others (liberalisation yes but with facilitation and capacity building to guarantee IDN interests)

Why beneficial?

• CEPA will boost Indonesian trade - $ 9.8 billion additional exports, esp. light industries and transport equipment

• Indonesia trade surplus with EU will increase with CEPA. $2 bn more cash in the bank annually.

• Boost economy - $6.3 billion additional GDP. • Boost investment from EU - get your fair share of

the other 98.4%!• Boost FDI not just for IDN domestic market but

also as export base to ASEAN and Asia generally• CEPA secures key market access to EU (GSP is

transitory).

20

Unique? EU Bilateral Agreements

And how to go about it?

Unique! How?

CEPA

Capacity Building

Trade FacilitationMarket Access

The EU-Indonesia CEPA proposes a comprehensive view on all aspects of the EU economic relationship

To ensure win-wins, improved market access (EU faster than Indonesia) is combined with trade facilitation and capacity building

Capacity building must learn from past – be comprehensive, be large, involve private sector and focus on outcomes

Ambition of the Vision Group

• Tariffs: zero for 95% of tariff lines and trade value in 9 years

• Sensitive products• Tackling TBTs and NTMs through cooperation

and consultation (joint dialogue) • Commitments on Services and investment • Regulatory framework and bodies • Taxation climate• Investment Protection and Promotion• Opportunities: Infrastructure

24

Better access of Indonesian fisheries exports to the EU Increased testing capacity in Indonesian laboratories Better research and advocacy capacity in EU and Indonesian

chambers of commerce

EU Rapid Alerts from Indonesian Fisheries imports

0

10

20

30

40

50

60

70

80

2002 2003 2004 2005 2006 2007 2008 2009 2010

fish and products thereof

crustaceans

Others

Total RASFF alerts

Capacity Building? Example

Dialogue? Example

• EU Indonesia Business Dialogue – KADIN, APINDO

• ASEAN EU Business Summits • Civil Society Dialogue – palm oil, timber, etc. • Governmental dialogue including areas where

Indonesia requires assistance

Bilateral issues but looking at opportunities

Main exporters to EU

0

200

400

600

800

1000

1200

1400

1600

1800

2006 2007 2008 2009 2010

Mill

ion

EUR

IND

MAL

PNG

COL

Opportunities: commodities only?

Timber

0100200300400500600700800900

1000

2001 2003 2005 2007 20090.0%1.0%2.0%3.0%4.0%5.0%6.0%7.0%8.0%9.0%10.0%

Indonesia's export to the EU, mln USDIndonesia's import from the EU, mln USDIndonesia's share in the EU imports, %

Opportunities: commodities only?

Cosmetics

0

50

100

150

200

2001 2003 2005 2007 20090.0%

1.0%

2.0%

3.0%

4.0%

Indonesia's export to the EU, mln USDIndonesia's import from the EU, mln USD% ,Indonesia's share in the EU imports

Opportunities?

Electronics

0200400600800

1,0001,2001,400

2001 2003 2005 2007 20090.0%0.5%1.0%1.5%2.0%2.5%3.0%3.5%

Indonesia's export to the EU, mln USDIndonesia's import from the EU, mln USDIndonesia's share in the EU imports, %

Opportunities?

But beyond…

• What about automotives... A jointly produced green car?

• EU supporting Indonesian clean energy (biomass)

• Indonesian processed food to the EU?• Tourism and Education?

Continuous dialogue towards … A unique partnership with prospects!!