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Looking towards the Trans Pacific Partnership

Indonesia has expressed interest in joining the Trans-Pacific Partnership (TPP); but are the TPP’s potential benefits to the country (removal of trade barriers and economic growth) outweighed by its potential downsides (greater foreign competition, turmoil for SMEs)?

In October 2015, H.E. Joko Widodo (Jokowi), president of Indonesia, voiced his interest in the on-going discussions surrounding the concept of Trans Pacific Partnership (TPP), which if it succeeds, would represent the largest trade agreement in history. Rumours abound among Indonesia‘s peers in South East Asia that Indonesia could itself join the TPP discussions, with Jokowi having already raised the issue with US president Obama, at the recent US-ASEAN summit. Whether or not participating in TPP would be beneficial for Indonesia, however, remains hotly contested and has been dividing opinions internally across the local business community. While many are thrilled by the potential opportunities to be accrued, others fear the pressure of ever greater foreign competition and doubt Indonesia’s readiness to join a trade bloc which may well prove to outshine the Association of South East Asian Nations (ASEAN)

Commonly regarded as part of the MIST wave of next emergent nations, Indonesia’s economic trajectory appears glistening. Being not only the largest archipelago in the world, but also the largest economy in South East Asia with a GDP of USD 868.3 billion, the country already features as a regional heavyweight and is notable for its strong presence at the international level and membership of bodies such as ASEAN, the Asia Pacific Economic Cooperation (AEC), the G20, and the World Trade Organization (WTO). Could joining the TPP act as yet another stepping stone on the pathway to attaining global relevance? Harry Haryanto, country manager for BDP International certainly thinks so pointing out that membership of the TTP would be a “logical next move” and “consistent” with the country’s historic tradition of engagement and activism in international affairs. The economic case may also prove compelling. According to Australian Trade Minister Andrew Tobb, the TPP would “remove approximately 98 percent of trade tariffs between its member countries” and thus “tremendously stimulate trade and economic growth,” also for Indonesia.

However promising, the removal of trade barriers would, though, enhance competition for domestic business; a circumstance not viewed favourably by all stakeholders. Wilani Widjaja, managing director at DHL Global Forwarding Indonesia, admits that joining the TPP would only bring benefits for her company, but foresees turmoil for Indonesia’s small and medium enterprises (SMEs), which would be subjected to formidable competition from multinational corporations. While doubting that Indonesia’s SME’s will sustain the international pressure, she further questions whether Indonesia is yet developed enough to maintain a beneficial position within the trade agreement, citing a deficit of suitable infrastructure across large swathes of the archipelago to practically enact any such deal.

Whichever side wins out in the end, the Jokowi administration’s positioning on the matter will hold high symbolic value as an indicator of the governing coalition’s economic conviction. Will the presidency opt to align with the forces of globalisation? Or will it choose to revert back to the old narrative of economic protectionism? Irrespective of the outcome, Indonesia’s TPP decision will show!

Click here to read more articles and interviews from Indonesia, and to download the latest free oil and gas report on the country.

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