Indonesia – EAEU relations: developing trade and economic cooperation

_ Hendra Manurung,  doctoral student, international relations, Padjadjaran University; Arry Bainus, professor, international relations, Padjadjaran University. Published as a submission to the MIWI Institute. Bandung, 14 September 2020.

Indonesia strengthens economic cooperation with countries in Eastern Europe and Central Asia which are members of the Eurasian Economic Union (EAEU), through the process of establishing a Free Trade Agreement (FTA) between Indonesia and EAEU. The path to this process was highlighted at the inaugural meeting between the Indonesian delegation and the Eurasian Economic Commission (EEC), the executive body of the EAEU (Indonesia Ministry of Foreign Affairs, July 10, 2020). The meeting was a follow-up to Indonesia’s proposal to form a Joint Feasibility Group (JFG) in the framework of the formation of the RI-EAEU FTA which was approved by the EAEU Trade Ministers on May 18, 2020.

East Europe and Central Asia, often also called Eurasia is a prospective market for leading Indonesian products. It can be done through the process of deepening trade and economic cooperation with Indonesian traditional markets, as well as seeking to open new markets for Indonesian products in prospective countries. The Eurasian Economic Union is an international organization for regional economic integration. It has an international legal personality and is established by the Treaty on the Eurasian Economic Union. It provides for free movement of goods, services, capital, and labor, pursues coordinated, harmonized, and single policy in the sectors determined by the Treaty and international agreements within the Union.

Further, the two parties discussed a number of issues in the Terms of Reference (TOR) of the Joint Feasibility Study Group (JFSG), including Objectives, Scope, JFSG Methodology, Timeline, and Publication of Terms of Reference and Joint Reports. The meeting agreed to review various inputs, exchange drafts, including a meeting plan to finalize the terms of reference.

The inaugural meeting was a step forward since the RI-EAEU FTA plan was initiated in 2017. The formation of the RI-EAEU FTA will encourage the expansion of Indonesia’s export market and increase Indonesia’s trade cooperation with EAEU. EAEU consists of Russia, Kazakhstan, Belarus, Kyrgyzstan and Armenia, which are rich in natural resources, agricultural products, and have technological advantages with large market potential, namely a population of more than 180 million, and GDP according to PPP of US$ 4.4 trillion or GDP per capita US$ 24,800.

In the international market, it is believed, Indonesia has a huge asset to develop a quality and sustainable economy. The markets and productive population of Indonesia reached about 150 million people will optimize the bargaining power of its own and will continue to be capitalized in developing economic cooperation with other countries for mutual benefit.

Indonesia’s economic diplomacy will continue to be encouraged and oversee Indonesia’s outbound investment policies abroad for the expansion and diversification of the Indonesian product market, as well as increasing the competitiveness of Indonesia’s industry at the international level and in the Asia Pacific region. At least, there are 285 Outbound Investment Indonesia today with a value of US$ 14.30 billion

In 2020, a number of economic cooperation negotiations will be a priority, such as the ratification of the IA-CEPA; ratification of the I-EFTA CEPA; RCEP signing; intensification of PTA / FTA / CEPA negotiations with African, South and Central Asian countries as well Pacific; exploring the FTA with the Eurasian Economic Union (EAEU), and encourage the implementation of economic agreements that have been signed with partner countries.

Economic diplomacy will also be continuously focused on enabling quality foreign investment to support Indonesia’s sustainable national development priorities, infrastructure development, human resource development, strengthening downstream industries, and the development of the outer, frontier islands, including the Natuna Islands.

Asian political stability and its dynamics of economic growth is a prospect for Russia to be engaged further. It is related to how Russia re-establishes political and economic influence progressively in the region in maintaining her eastward-focused integration drive, including building a southeastwards bridge to China and the Asia Pacific. In this context, therefore, the cooperative nature of Russian policies is the condition sine qua non for the establishment of the Eurasian Economic Union in 2015. Russia is perceived to consistently contribute its role as a unifier of the Commonwealth of Independent States (CIS).

Roman A. Romanov, representative of the Ministry of Foreign Affairs of the Russian Federation stated that, the progress of cooperation between the two countries especially in the economic, security, military, humanitarian, and cultural. During 2019, Indonesia and Russia have reached trade amounted to US$ 2.45 M, and is expected to increase after the signing of a strategic partnership (Indonesia Ministry of Foreign Affairs, Aug. 25, 2020).

Meanwhile, on the 14th ASEM Foreign Ministerial meeting in Madrid, Spain, Indonesian Foreign Minister, Retno Marsudi and Kazakhstan’s Foreign Minister, Mukhtar Tileuberdi met and discussing the efforts of the two countries in exploring opportunities for economic cooperation (Indonesia Ministry of Foreign Affairs, Dec. 17, 2019). Indonesia and Kazakhstan recorded a significant increase in trade value from US$ 60.3 million in 2018 to US$ 317.85 million in the January-October 2019 period. However, there is still a lot of potential for cooperation between the two countries that need to be explored, including in the banking, halal industry, agriculture, energy, and strategic industry.

Further, Jakarta also hoped that Astana would render its support as a member of the initiator of the Eurasian Economic Union (EAEU) towards the initiative of forming the Free Trade Agreement Indonesia – EAEU. Suppose that the cooperation within the EAEU framework is expected to further advance the regional economy, especially in Europe and Asia continent. Also, Indonesia expressed its wish for both countries to further explore the potentials of cooperation at the 2nd Joint Commission on Economic Cooperation. The Joint Commission is expected to open new frontiers of economic cooperation, especially in increasing business-to-business contact.

Kazakhstan also requested Indonesia to elevate its participation in the Islamic Organization for Food Security to a full membership. They also invited Indonesia to attend the Conference on Interaction and Confidence Building Measures (CBM) in Asia in 2020, in which Kazakhstan would hold chairmanship in 2020-2022.

Indonesia together with the Eurasian Economic Commission (EEC) signed a Memorandum of Cooperation in the framework of enhanced cooperation between Indonesia EAEU (Eurasian Economic Union). The signing was done by the Minister for Trade, Enggartiasto Lukita, and the Minister for Integration and Macroeconomics of the EEC, Sergey Glaziev, on the sidelines of the Trade Expo Indonesia in ICE BSD City, Tangerang (Indonesia Foreign Ministry, Oct. 18, 2019). The meeting is the implementation of President Joko Widodo in accelerating export done through the opening of new markets for Indonesian products, and EAEU countries are non-traditional (Indonesia Ministry of Trade, Oct. 18, 2019).

In Jakarta, on February 14, 2019, Indonesia pioneered the beginning of trade talks and economic cooperation with five Eurasian countries who are members of the Eurasian Economic Union (EAEU).

Indonesia was chosen to host the 2020 Parliamentary Meeting of the Eurasian Countries or the 5th Meeting of Speakers of the Eurasia Countries’ Parliaments / MSEAP. Indonesia in Southeast Asia has a very strategic position. That is why the Eurasian countries specifically asked Indonesia to host it in 2020.

Furthermore, the countries of the Eurasian region are countries that have prospectus relations with Indonesia from the side of trade as well as the other side of politics and culture.

In the midst of the global pandemic, for Indonesia, Eurasia can be an entry point in conducting and developing trade diplomacy. For example, about palm oil, there is currently a negative campaign on palm oil initiated by several European countries that are members of the European Union.

Indonesia and the EAEU have agreed to sign a memorandum of cooperation (MoC) to enhance economic cooperation through bilateral trade and foreign investment. The cooperation is mostly focused on trade and investment. Memorandum of Cooperation is a form of agreement to establish a Joint Working Group to discuss ways and means to increase trade and investment between the two parties. Indonesian Minister of Trade, Enggartiasto Lukita, signed the MoC with the Minister for Integration and Macroeconomics of the Eurasian Economic Commission (EEC) Tatyana D. Valovaya.

At this meeting, the two ministers agreed to increase bilateral cooperation regarding the establishment of a joint working group. Therefore, these ministers instructed the technical officials to immediately finalize the MoC. This meeting is also a follow-up to the previous meeting which took place in December 2017. Previously, EEC had also signed a similar MoC with several ASEAN countries such as Singapore, Thailand, Vietnam, and Cambodia. EEC is a unitary government body for economic integration in the Eurasia region (EAEU) which was formed in 2014. EAEU has members from countries in the Eastern European and Central Asian regions such as the Russian Federation, the Republic of Armenia, the Republic of Belarus, the Republic of Kazakhstan, and the Republic of Kyrgystan.

The trade value between Indonesia and EAEU in 2017 reached US$ 2.79 billion. In the same year, also, Indonesia’s exports to the EAEU amounted to US$ 1.25 billion. Indonesia’s main export products are palm oil (US$ 386.75 million), machine tools (US$ 178.16 million), coffee (US$ 78.97 million), palm seeds (US$ 77.22 million), and margarine (US$ 50.92 million).

Meanwhile, Indonesia’s import value from EAEU in 2017 was US$ 1.54 billion with the main products including semi-finished steel (US$ 419.18 million), mineral and chemical fertilizers (US$ 322.45 million), wheat and merlin (US$ 246.16 million), and aluminum (US$ 82.89 million).

It is hoped that the formation of a joint working group will encourage trade and investment relations between Indonesia and the EEC, the elimination of trade barriers, and collaboration in various sectors which are mutual interests of both parties.

Indonesia also realized in achieving high economic growth and the quality is now facing the challenge of protectionism, narrow nationalism, and a variety of false populism campaigns.

Indonesia considers that this negative trend must be transformed into positive energy. The rivalry is important to turn into cooperation and the trust deficit must be replaced by a strategic trust.

In the midst of increasing protectionist attitudes, Indonesia will build a coalition to continue to promote the paradigm of mutual benefit, justice, and not zero-sum. The keyword is collaboration. The collaboration will create opportunities, create new centers of economic growth, and can find solutions to global challenges.

It is also important for Indonesia and the countries that are members of Eurasia to uphold applicable international law as high as possible, especially in realizing world peace and global stability, especially in the Asia Pacific region.

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