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Trans-Paci c Partnership & Indonesia: Unclear Future unclear-

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10 November 2016|Airlangga Hartanto (http://www.indonesia-investments.com/tag/item31?tag=6756)unclear-

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Indonesian Industry Minister Airlangga Hartanto is pessimistic about the future of the Trans-Paci c Partnership
(TPP) now Donald Trump has won the US presidential election earlier this week. During his campaign Trump
repeatedly emphasized the need for more protectionist measures and the reviewing of free trade deals in order to
make the US economy stronger. Previously, Indonesian President Joko Widodo said Indonesia is eager to join the
TPP within the next couple of years.

The Trans-Paci c Partnership (TPP) is a free trade that was signed in October 2015 after ve tough years of
negotiations. Currently, the TPP consists of 12 nations, including the USA and Japan, which together are estimated
to cover 40 percent of world trade. By lowering tariffs for a wide variety of products (hence liberalizing trade to a
high degree) global trade is expected to get a boost through this free trade deal. Other side effects would be rising
job creation and innovation, productivity and competitiveness, while poverty reduces, and transparency as well as
good governance is promoted. It is also believed the TPP was designed to form a counterbalance to the large
economic in uence of China.

Indonesia did not join (yet) as policy makers are divided about the impact on the Indonesian economy. Supporters
say joining the deal would make the Indonesian economy more ef cient (as Indonesia will need to improve
measures to combat bureaucracy, improve the business climate as well as the standard of products), while
Indonesian exports become more competitive due to the scrapping of various tariffs between member nations.
Critics, however, fear Indonesia merely becomes a lucrative export destination for the more competitive
economies, particularly because Indonesia (with a population that numbers over 255 million consumers and
includes a rapidly growing middle class segment) has a big consumer force. For example, after the ASEAN-China
Free Trade Agreement (ACFTA) came into effect in early 2010, Indonesia's trade de cit with China had doubled
within one year. The main problems are that Indonesia's manufacturing sector lacks competitiveness, logistics
costs are high across the nation (because of weak infrastructure development), while the country remains heavily
dependent on commodity exports.

Airlangga Hartanto, the Indonesian Minister of Industry, is a supporter of Indonesia joining the TPP. He believes
direct investment into Indonesia will grow as the country becomes an attractive production hub for exporters due
to the zero export tariffs to member nations. For example, Japanese manufacturers will be interested to develop
production facilities in Indonesia as they will be able to enjoy cheap gas prices (hence lower production costs
compared to costs in the home country) and then can export the output at attractive rates to TPP member nations.

He added that by not having joined the TPP Indonesia's competitiveness in fact weakened. For example, Vietnam
(one of the TPP members) can export products at attractive rates to the USA, while Indonesian exporters are
plagued by import tariffs, hence Indonesian products are about 10 percent more expensive on the US market
compared to Vietnamese counterparts.

"We will wait and see whether Trump will have the USA leave the TPP deal. Usually there is a difference between
speech during campaigning and action after being elected. Therefore we will simply have to wait," Hartanto said.
(http://www.indonesia-investments.com)
Poll Indonesia Investments:

Should Indonesia join the Trans-Paci c Partnership deal?

Voting possible: 30 October 2015 12:38 - 01 January 2017 23:00

YOUR VOTE
Yes