Despite historical closeness, trade negotiations between Indonesia and India in recent years haven’t progressed at a desirable speed. Taufik Rigo, First Secretary – Economic Affairs at the Embassy of Indonesia in New Delhi, speaks on the need to forge newer, stronger trade pacts between the two nations.

Interview by Ahmad Shariq Khan | June 2016 Issue | The Dollar Business

TDB: India and Indonesia have always enjoyed excellent political and economic rapport. How do you see the deep-rooted bond between the two historically, traditionally interlinked, and regionally close countries?

Taufik Rigio (TR): It is true, the two countries have always enjoyed a good rapport with each other. Hinduism, Buddhism and later Islam travelled to Indonesia (then renowned as the Nusantarian Civilisation) from the shores of India, especially from Gujarat. The Indonesian folk art and dramas are also based on stories from the great epics of Ramayana and Mahabharata. And, during our respective struggles for independence, national leaderships of India and Indonesia led by Jawaharlal Nehru and President Sukarno respectively collaborated closely in supporting the cause of Asian and African independence, and later also laid the foundation of the Afro-Asian and Non-Aligned Movement (NAM) at the Bandung Conference (the Asian-African Conference) in 1955. And, I must say, the bonhomie continues till today.

TDB: India is the largest buyer of crude palm oil from Indonesia and imports coal, minerals and rubber. India exports refined petroleum products, maize, commercial vehicles and telecommunication equipment. Do you think the India-Indonesia bilateral trade is headed in the right direction?

TR: Yes, I believe the India-Indonesia trade, especially in merchandise, is going in the right direction. As I see it, both nations are playing to their key strengths.

With highly fertile soils and abundant natural resources, thanks to plenty of ash from many active volcanoes across Indonesia, we are home to a diverse and thriving minerals and agricultural industry. Of late, enjoying a good level of industrialisation, the country’s exports have been boosted by significant shipments of machinery, boilers, leafage products, electrical, electronic equipment among others.

I believe both nations are currently undergoing transformation – both being developing economies with an ambition to grow fast. Both countries are also mobilising foreign direct investment (FDI), and hence, going forward, they would surely require each other’s assistance, knowledge and expertise to march towards a better future.

TDB: What challenges do you foresee when it comes to bilateral trade between the two countries?

TR: The recent times have thrown some challenges at us. One important issue is related to ASEAN-India Free Trade Agreement (AIFTA) and its impact on the trade of both nations. We are signatories to it, despite this, and it is very unfortunate that I have to say this, India is not implementing the AIFTA faithfully under which there should not be any tariff and non-tariff barriers on goods from and to the respective countries.

Gold is one precious metal that Indonesia can export to India in large volumes. While we are among the leading producers of gold in the world, the Indian market has a great appetite for gold and gold jewellery. In fact, the world has recognised Indonesia as the 6th largest producer of gold, producing 65 metric tonne of gold every year. So, this is one area where we see a lot of export potential from the Indonesian side. However, the issue is India has started imposing many non-tariff barriers such as imposing 100% bank guarantees for imports.

Even officials at ANTAM, a State-run Indonesian enterprise and the largest gold producer in Indonesia, say that the Indian government keeps imposing too many conditions that go beyond what was agreed by the AIFTA.

Recently, the Indian gold importers had also petitioned and sued the Government of India before the court of law for misreading 200 MTs of gold ore as 200 MTs of refined gold. The High Court of Delhi issued its verdict on April 26, 2016 in favour of the importers. I would like to gently call upon the government of India to swiftly implement without delay the Delhi High Court’s verdict.

TDB: What other issues hamper trade between Indonesia and India?

TR: We have noticed that the Indian government has allocated huge funds towards the development of ports and other infrastructure. We could only wish that India’s eastern corridor was more developed in terms of infrastructure. India’s eastern shore is adjacent to Southeast Asia’s western frontier and is connected through the Bay of Bengal. An investment in infrastructure in that area can boost trade between the two nations.

Additionally, I believe that the threat of piracy can also be reduced to a large extent by developing this corridor as increased sea traffic (and hence better policing) will naturally deter pirates. I must also make a mention of the imminent import plan by the Indonesian government of a huge quantity of bovine meat, de-boned and de-glanded, from India. The Indonesian government has agreed to amend the existing import ban on the product. The ban will now be country-specific rather than being zone-specific. This will allow Indian slaughterhouse-cum-abattoirs to export, for the first time in history, their water buffalo meat and thus increase their exports to the Indonesian market. We are certain this will narrow India’s deficit in bilateral trade. And none of these are happening as a result of any pressure exercised by Indian government. The Indonesian government is opening up this import as an act of good faith to narrow the deficit gap. We are also happy to discuss many other possibilities of imports from India, such as refined sugar, rice, and perhaps more cotton and wheat.

There is another area of concern that relates to joint trade initiatives between the two countries. The Comprehensive Economic Cooperation Agreement (CECA) is not moving ahead at the expected pace. Both countries have also been slow to begin discussions on the Bilateral Investment Treaty (BIT) and the Joint Working Groups (JWGs) on agriculture, coal, oil & gas, and healthcare. We must realise that both countries need to show haste to conclude negotiations. Despite our impressive progress, our bilateral trade agreement has become obsolete and is in need of fundamental overhaul and harmonisation. We would like to discuss with the Indian government on how to proceed with these. Indonesia is open to doing business with all like-minded countries like India for the mutual benefit of our nations.

Also while dealing with India, we wish to see only a limited role of third party countries in “facilitation” of trade, especially with respect to price-setting. Indian buyers and Indonesian sellers must sit together, face-to-face, to achieve a mutually beneficial price. There is need to work extra hard, on both sides, to reconsolidate the regional supply chain in many critical primary products.

TDB: Despite being a big producer of several agro products, Indonesian producers are not the ultimate price setters in many segments. Why so?

TR: As the second-largest rubber producer in the world, we value our long held association with Indian importers of rubber and it’s a matter of great pleasure for us that today, India ranks as the fourth-biggest importer of Indonesian natural rubber. But as per the existing supply chain, there are brokers operating largely from Singapore who opt to gather sourcing needs from all over the world. As a result, global rubber product manufacturers are left with no option but to deal through Singaporean brokers – and some even through Malaysian brokers – than directly with Indonesian processors. We want India buyers to act as industrial enablers and neutralisers against such practices of the market. Both India’s and Indonesia’s strategic partnership requires reinvigoration to tackle such issues.

 

Port of Tanjung Priok in North Jakarta. The port is the busiest and most advanced Indonesian seaport handling more than 50% of Indonesia’s
transshipment cargo traffic.

TDB: The Economic Division of the Indonesian Embassy is organising ‘Indonesia Exposé 2016’ in New Delhi. Please tell us more about this event.

TR: Our Trade Counsellor has been promoting Indonesian products in the Indian market, and making assessments on market intelligence received. After evaluating the prospects we have planned on organising this unique event “Indonesia Exposé 2016: Seizing TITIS” (Trading, Industry, Tourism, Investment and Services) opportunities in Indonesia, which is aimed at showcasing the prowess of Indonesia’s trading, industry, tourism, investment, and services sectors to a large, but select and segmented industry and trade audience here in the very capital of India. We are going to offer a very customised, one-to-one business meeting platform between players from both countries.

The Indonesia Exposé will also feature a series of business services and talks that I believe will be very helpful to traders and stakeholders from both countries. We hope that some contentious issues in trade and investment can find reasonable solutions on this platform. We expect that the Indian industry, both well-established players as well as the younger generation, will embrace the event and gain insights on Indonesian culture and industry. The two economies have much in common, and this is an endeavour to bring our harmonious relationship to light and promote trade and industry, as well as people-to-people bonds, between these two great nations.

TDB: What would be your message to Indian policymakers?

TR: It is in our best interest to stay together and help each other on various (common) fronts – both economic and otherwise. Geostrategiclly speaking, a good rapport between the two nations can also act as a balancing power to keep a check on any increased undue influence by any competing power in the region, especially in the Bay of Bengal and Indian Ocean. Indonesia is friends with many nations. So is India. This way both nations can raise their common security concerns in the region.

For example, India can benefit from Indonesia’s rapport and historical ties with China, US and Japan. Indonesia’ LNG deposits in Tangguh, and gold, copper and silver deposits in Mimika – both in the Island of Papua – are areas that potential Indian investors can contemplate investing in. The Bilateral Investment Treaty (BIT), which not only protects respective outbound investments but more importantly also promotes inbound investments, could help in the process of investing in each other’s country and we would also like a quick and positive conclusion to the negotiations with respect to BIT.