At the Indonesia-Africa Forum (IAF), held on 10-11 April 2018 in Bali, Indonesia agreed to negotiate preferential trade agreements (PTAs) with three African countries: Mozambique, Morocco, and Tunisia. Trade talks are part of a strategy to widen Indonesia’s export markets. Considering heightened concerns over global trade as the USA and China – the two biggest trade partners of Indonesia – are implementing tariffs, Indonesia seeks to tap new markets, hence reducing its dependence on traditional export markets thus reducing the impact of US-China related trade turmoil.
The focus on more intensive trade relations with African countries came after Indonesian President Joko Widodo visited the Indian Ocean Rim Association (IORA) Summit in March 2018. The IORA is an international organization, consisting of coastal states bordering the Indian Ocean, that aims to promote co-operation and closer interaction among its 21-member nations. Indonesia joined the IORA in 1997.
At this summit Indonesian Trade Minister Enggartiasto Lukita stated that the IORA member nations are the future of the world economy and thus it is of strategic importance to enhance trade relations with these member countries. Total trade among the IORA nations reached USD $777 billion in 2015, up significantly from USD $233 billion in 1994. Moreover, approximately 70 percent of world trade goes through the Indian ocean, the world’s third largest ocean. Particularly in terms of oil and gas distribution, the Indian Ocean is the world’s key seaway.
At the inaugural Indonesia-Africa Forum (IAF) on Bali, Lukita had bilateral talks with Ragendra Berta de Sousa, Mozambique’s Minister of Industry and Commerce. After the meeting both sides issued a joint statement in which they confirmed their commitment to start negotiations for a preferential trade agreement (PTA).
Total trade between Indonesia and Mozambique reached USD $82.2 million in 2017, with Indonesia having the upper hand. Indonesia exported USD $54.1 million of goods to Mozambique last year, while Mozambique shipped USD $28.1 million of goods to Indonesia.
Meanwhile, Lukita also had a meeting to talk bilateral trade with Mounia Boucetta, Morocco’s Secretary of State to the Minister of Foreign Affairs and International Cooperation. She confirmed Morocco’s interest in the proposal of Indonesia to engage in a PTA.
In 2017 total trade between Indonesia and Morocco reached USD $154.8 million with Indonesia also having the upper hand: Indonesia exported USD $86 million worth of goods to Morocco, while Morocco shipped USD $68.8 million of goods to Indonesia.
Meanwhile, a preliminary meeting was conducted between officials of Indonesia and Tunisia. Both sides are interested to talk about a PTA. However, so far there has not been an official statement about future plans.
Total trade between Indonesia and Tunisia reached USD $88 million in 2017. Again, Indonesia had the upper hand in this trade relation (a trade surplus). Southeast Asia’s biggest economy shipped USD $55.2 million worth of goods to Tunisia, while Indonesia imported USD $22.4 million worth of goods from the North African country.
Stronger trade ties with Mozambique, Morocco and Tunis will also open opportunities for Indonesia to boost trade with the whole African continent; a continent that forms a growing market for investment and infrastructure. In 2017, Indonesia’s total trade with this continent reached USD $8.84 billion, an increase of around 15 percent from 2016. And although coming from a low base, Indonesia recorded strong bilateral trade growth with several African countries last year, including Liberia (+284 percent y/y), Comoros (+260 percent y/y), and Gabon (+215 percent y/y). Therefore, there should be much more room growth in the future, especially for exports of food & beverage products, textiles and crude palm oil.
Trade Talks Indonesia & the World:
|Country – Type of Agreement
||Target of Implementation
|Mozambique – PTA||December 2018|
|Kenya – PTA||2018|
|Morocco – PTA||August 2018|
|South Africa – PTA||December 2018|
|Nigeria – PTA||December 2018|
|Turkey – Trade in Goods||October 2018|
|Peru – Trade in Goods||2018|
|Sri Lanka – PTA||December 2018|
|Bangladesh – PTA||2018|
|Eurasia – CEPA||2019|
|GCC – CEPA||2018/2019|
|ASEAN Canada – FTA||2018|
Source: Bisnis Indonesia