RI, Japan overcome hurdles in trade talks

Andi Haswidi, The Jakarta Post, Jakarta

Indonesia and Japan have finally agreed on most of the major elements of their proposed Economic Partnership Agreement (EPA), and are set to sign preliminary agreements in Japan on Saturday, Trade Minister Mari Elka Pangestu says.

"The chief negotiators ... are finalizing two things this week; the agreement in principal on major elements, and the records of discussion, and will sign them on Saturday," Mari said Friday at the Trade Ministry.

The minister said the agreements would be signed during President Susilo Bambang Yudhoyono's three-day visit to Japan starting Saturday.

Mari said the negotiations on further aspects of the EPA would take several more months, adding that she expected the final agreement to be ready by mid-2007.

Even then, she explained, the entry into effect of the full agreement would have to wait until the necessary amendments had been made to Indonesia's investment, tax and labor legislation by the House of Representatives.

Talks on the Indonesia-Japan EPA have been underway since June 2005 following a visit by President Yudhoyono to Japan that month, with six official negotiating rounds and many other meetings having taken place to date.

The planned partnership agreement will cover issues such as the liberalization of trade in goods and services, the movement of people, energy and minerals, standards and conformance, improvements to the business environment, and investment.

"This is a comprehensive agreement, and will see the removal of 90 percent of tariffs. Some tariffs will be lifted immediately, while others will be gradually phased out over periods of three, six or 10 years," she said.

Japan is expected to drop tariffs on Indonesian manufactured products such as textiles, and marine and farm products such as shrimp and tropical fruits, but will keep those on rice and plywood, while Indonesia will abolish tariffs on such things as automotive products and electronics goods.

Indonesia currently imposes tariffs of between 65 and 80 percent on automobiles from Japan. It is envisaged that tariffs on models with engine sizes exceeding three liters will be lifted by 2012, while those on models with engine sizes of 3 liters or less will be removed by 2016.

To ensure a mutually beneficial partnership, Mari said that Indonesia was seeking cooperation in projects that would ensure knowledge and skills transfer so as to improve Indonesia's production capacity and standards, which in turn would increase the country's global competitiveness.

"Training will be provided as regards the transfer of skills and technology. In the manufacturing sector, for example, we hope to see am improvement in the quality of our industrial components."

"And in the food sector, we hope that we can improve our standards so that we can meet Japan's market requirements," Mari said.

It is also expected that, based on the EPA, Japan will accept skilled labor from Indonesia, including nurses, care workers and hotel staff, in response to the aging problem that Japanese society is facing, which is set to give rise to labor shortages in the service and other sectors.

If this comes to pass, Indonesia will become the second nation, following the Philippines, to be allowed to send workers to Japan under an economic partnership agreement.

The total value of trade between Indonesia and Japan stood at US$24.96 billion in 2005, with Indonesia's exports to Japan standing at $18.05 billion and imports from Japan at $6.91 billion, leaving a surplus in Indonesia's favor of $11.14 billion. Total trade is currently increasing at 3.07 percent per annum.