Indonesia Australia Business Council 2021: IA-CEPA in the Midst of the Global COVID Pandemic
Rifdah Khalisha – Public Relations FEB UI
DEPOK – (27/7/2021) The Indonesia Australia Business Council (IABC) held an online dialogue entitled “IA-CEPA in the Midst of the Global COVID Pandemic” on Tuesday (27/7). Presenting Dr. Siswo Pramono (Head of the Indonesian Ministry of Foreign Affairs Policy Assessment and Development Agency) at the opening remarks, Kiki Verico, S.E., MRI., PH.D. (Vice Director of Research at LPEM FEB University of Indonesia) as the keynote speaker, and George Iwan Marantika (National President of IABC) as the host of the event.
Indonesia and Australia have agreed on a bilateral economic agreement, the Indonesia-Australia Comprehensive Economic Partnership Agreement (IA-CEPA). The IA-CEPA officially took effect on July 5, 2020.
In this online dialogue, the speakers discussed the ratification of the IA-CEPA economic cooperation between Indonesia and Australia, which was legally enforceable exactly a year ago and the impact of the global COVID-19 pandemic on its implementation.
In the opening, Siswo considered that the implementation of the IA-CEPA was very important, not only for Indonesia and Australia, but for the countries that are members of ASEAN as well. “Indonesia and Australia are committed to protecting ASEAN and Oceania countries,” he said.
Siswo said, “The implementation of the IA-CEPA can strengthen and increase investment in Indonesia. This may lead to, increasing trade from Indonesia to Australia and to third countries, such as countries in the Pacific Islands, becoming more significant and strategic.”
Furthermore, Kiki expressed his thoughts on the IA-CEPA collaboration based on his special research entitled “Measuring Bilateral Economic Relations: The Case of Indonesia-Australia.”
His research discusses a number of benefits from the agreement to ratify the IA-CEPA with reference to two objectives. First, assess the potential for long-term trade and investment relationships with a combination of RCA (Revealed Comparative Advantage) and CMSA (Constant Market Share Analysis) with ToT (Terms of Trade) and NX (Net Export) as filters. Second, measure the potential impact of tariff elimination using the GTAP (Global Trade Analysis Project) model.
Furthermore, he explained the logical framework of trade, namely Foreign Direct Investment (FDI) and Structural Reform, through the concept of sunset (sunset) and sunrise (sunrise) industries as a rational choice.
He explained, “Referring to the comparison of macroeconomic indicators, Indonesia and Australia are at different levels. In static macroeconomic indicators, Australia is a high-income country, while Indonesia is just entering the upper-middle income level.”
“Research confirms the decline in the role of manufacturing in Indonesia. As many as 56 percent of manufactures are in sunset and poor conditions, then another 44 percent are in the sunrise and great categories,” he added.
Kiki found that there are 23 trade products (HS-4) in Indonesia, which are classified as sunset and elegance. However, in Australia the product is classified as sunrise so it is suitable to receive investment from Australia. In addition, there are 17 products in Australia that have the potential to receive investment from Indonesia because of this combination of sunrise and sunset relationships.
According to forecasts, Australia will benefit from investments in the textile, apparel, footwear, light manufacturing and service sectors. Meanwhile, Indonesia has potential for investment in grain, meat, processed food and heavy manufacturing. GTAP10A simulation results show that Australia is suitable for investing in the service sector, including education services in Indonesia.
Finally, Kiki found that economic cooperation between Indonesia and Australia is complementary and fulfills the trade investment relationship. The CEPA Bilateral Model fits the needs of both countries, Indonesia can increase manufacturing productivity and Australia can benefit from the sunrise to sunset relationship. That way, both can share mutual benefits in a sustainable manner.
For him, the economic relationship between Indonesia and Australia is not only beneficial for the two countries, but also for the Southeast Asia and Pacific region.
Other panelists who contributed ideas were Sally Deane (Senior Trade and Investment Commissioner Indonesia, Austrade), Peter Fanning (Foreign Legal Counsel, Hutabarat Halim and Rekan), Noke Kiroyan (Executive Chairman and Chief Consultant of Kiroyan Partners), Rebecca Hall (Commissioner to Southeast Asia, Victorian Government Trade and Investment), and Ben Giles (Trade and Investment Commissioner Indonesia).
In ending the dialogue, George concluded that the motivation and enthusiasm of the business world in Australia and Indonesia remains high to increase investment and trade between the two countries, even though currently both of them are facing economic challenges due to the pandemic.
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