THE ISAFIS GAZETTE #14: Indonesia and Japan Forge Agreement to Eliminate Trade Barriers: Strengthening Economic Ties

Published by Research and Development on

Written by: Dwie Rizqa Sabina

The ASEAN-Japan Commemorative Summit for the 50th ASEAN-Japan Friendship and Cooperation took place on Sunday (17/12) in Tokyo, Japan. The summit was attended by 12 heads of state and heads of government from ASEAN member states, Timor-Leste, and Japan. The event marked 50 years of cooperation between ASEAN and Japan.

Indonesian President Joko Widodo attended the summit as the Chair of the Indonesian Delegation and Chair of ASEAN for the 2023 period. During the Summit, efforts to advance ASEAN-Japan cooperation in various sectors were raised.  These efforts were marked by the agreement of the ASEAN-Japan Joint Vision of Friendship and Cooperation and the ASEAN-Japan Vision Implementation Work Plan, which also includes important issues in the economic pillar, one of which is increasing Japanese investment to boost infrastructure and connectivity, resilience in regional supply chains, encouragement to utilize the Regional Comprehensive Economic Partnership (RCEP). Bilateral cooperation between Indonesia and Japan in the economic field is timed in the IJEPA which has the aim of increasing Japanese investment in Indonesia to create benefits between the two with each advantage owned by Indonesia and Japan.

On August 20, 2007, Indonesia and Japan signed an economic partnership agreement known as IJEPA (Indonesia-Japan Economic Partnership Agreement), which came into effect on July 1, 2008. IJEPA is based on three main pillars: liberalization, investment/trade facilitation, and cooperation. 16 years later, on 16th December 2023, Indonesia and Japan continued to implement one of the key pillars of the IJEPA which was to remove more trade barriers. Japan and Indonesia will improve ties in the banking sector, and Japan will provide greater access to Indonesian products including by removing tariffs on processed fishery goods.

Indonesia’s Minister of Trade, Zulkifli Hasan, stated that by providing market access by Japan, Indonesian processed fish products will be more competitive and Japanese investment in fisheries in Indonesia can be facilitated, considering the large consumption of fishery products by the Japanese population. During the meeting in Tokyo, the two countries agreed to further strengthen various cooperation and efforts to increase trade and economy, one of which is by accelerating the completion of the Protocol to Amend the Indonesia-Japan Economic Partnership Agreement (IJEPA).

Both Indonesia and Japan expect the amendment to the Indonesia-Japan Economic Partnership Agreement (IJEPA) to be implemented in the first quarter of 2024, although the agreement still needs to be formally signed and ratified by the respective parliaments after legal examination. Foreign Minister Retno Marsudi’s remarks came after Indonesian President Joko Widodo held a bilateral meeting with Japanese Prime Minister Fumio Kishida on the sidelines of the Tokyo Summit marking 50 years of relations between Japan and ASEAN.

Indonesia’s Trade Minister is optimistic that bilateral trade between Indonesia and Japan can continue to increase. This belief is based on the fact that Indonesia and Japan currently have economic cooperation agreements, both bilateral trade agreements. The total trade between Indonesia and Japan in 2022 was recorded at 42.03 billion US dollars. Of this value, Indonesia’s exports to Japan amounted to 24.85 billion US dollars and Indonesia’s imports from Japan amounted to 17.18 billion US dollars. Thus, Indonesia has a trade surplus with Japan of US$7.68 billion. These numbers affirm the positive trajectory of bilateral trade, providing a solid foundation for the belief that economic cooperation between the two nations will continue to flourish.

In essence, the agreements and ongoing efforts, especially within the framework of IJEPA, not only signify a deepening economic partnership but also symbolize a commitment to mutual benefit and shared prosperity. As we look forward to the implementation of the IJEPA amendment, the collaboration between Indonesia and Japan stands as a testament to the strength and resilience of their diplomatic and economic ties.

Dwie Rizqa Sabina is a Design Manager of the Media, Communication, and Design division in ISAFIS 2023. She is currently studying Economic Development at the Universitas Sumatera Utara. With an academic background in the field, she has a keen interest in the intricacies of economic systems and inclusive economic landscape.

References

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