Transcript Document

Supply Chain Linkages Across
Borders in Asia:
Indonesia’s Perspective
Andin Hadiyanto
Director of the Business Climate
Research and Development Center
Ministry of Trade - Indonesia
Fostering Trade through Private-Public Dialogue
Expert Meeting on Regional Integration in Asia
New Delhi, India, 28-29 March 2007
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Indonesia Export Competitiveness
Indonesia's Non-Oil Exports By Region
Export Value
($m)
12,000
2004
10,000
2003
8,000
6,000
4,000
• Japan and highgrowth Asian
markets are
Indonesia’s best
customers
• China, India,
Malaysia and
0
EU25
NAFTA ASEAN Japan
China
Other EA ROW
Thailand markets
grew fastest for
Indonesia's Non-Oil Export Growth by Region
Indonesian products
2000-2004 18.24%
20%
since 2000, reflecting
15%
the global trend of
10%
7.39%
regional trading
4.46%
5%
blocs and
2.14%
1.00%
0.29%
0%
production sharing 2
-1.80%
arrangements
-5%
2,000
EU25
NAFTA
ASEAN
Japan
China
Other EA
ROW
ASEAN Trade and Investment
Trade
• ASEAN’s trade with the world has grown from US$0.7 to US$1.1
trillion from 2001 to 2005
– Exports grown from US$0.4 to US$0.6 trillion
– Imports grown from US$0.3 to US$0.5 trillion
– Major ASEAN trading partners are the US, the EU and Japan
• Intra-ASEAN trade has grown from US$141 to US$268 billion
from 2001 to 2005
– Exports grown from US$77 to US$144 billion
– Imports grown from US$64 to US$125 billion
– Major intra-ASEAN trading partners are Singapore, Malaysia and
Thailand
Investment
• Total foreign direct investment in ASEAN from the world has
grown from US$18.5 to US$25.6 billion from 2001 to 2004
– Increasing investment in ASEAN’s manufacturing sector
• Total intra-ASEAN investment has fallen slightly from US$2.5 to
US$2.4 billion from 2001 to 2004
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The Benefits to Indonesia from the Global Supply Chain
• Strengthened comparative advantage
– Indonesia is able to specialise in a segment of the
production chain to cement its place in the global supply
chain
– Provides greater room for specialisation especially in labour
intensive stages of production
• Sustainable jobs and exports
– Strengthened comparative advantage ensures sustainable
and expanding jobs in export industries
• Advance up the technology ladder
– Move from the specialisation in the existing segment of the
production chain to a higher value added segment of the
production chain
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The Benefits to Indonesia from the Global Supply Chain
• Impetus for more improved Indonesian infrastructure
– Just-in-time production networks necessitates improving the
efficiency of production supporting infrastructure
• Transport and telecommunications infrastructure
– Demand driven infrastructure development
• Provides opportunities for Indonesia supplying the global supply
chain
– Indonesia can develop a segment of the production network to
feed into the region production network and then global supply
chain
– Benefit from globalisation, climbing the technology ladder and gain
wider access to international markets
• A more integrated and closer to the region (EA/ASEAN)
– Production sharing means Indonesia becoming more
interdependent on each other with countries in the region
– Impetus for more market oriented policies
• Renders protectionist, import substitution and anti-foreign
investment policies less effective
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Lessons for Indonesia
• To develop diverse products in a timely and cost
effective way in response to market demand and
to exploit market opportunities
• To respond in a timely and cost effective way to the
changing demand for components
• To continue to improve logistics
– Adopt, in a timely and cost effective, the process of
controlling the flow and storage of materials, finished
goods, services, in response to changing environmental
conditions
• To improve information technology system to adapt
and support changing requirements of the business
environment
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Indonesia’s Way Forward
Support to ASEAN Economic Community
• Continue to pursue ASEAN’s vision as a single market and production
base by 2015
– Strengthens ASEAN’s position in the global supply chain
– Deepens specialisation and improves the efficiency of ASEAN’s
production base
– ASEAN has a number of initiatives to support ASEAN as a single
market and production base
• Integration for 11 priority sectors
– Argo-based products, air travel, automotive products, eASEAN, electronics, fisheries, health care, rubber-based
products, textiles and apparels, tourism and wood-based
products
» Cost competitive products represent around 50 per
cent of intra-ASEAN trade
• ASEAN Investment Area
• ASEAN Industrial Cooperation Scheme
• ASEAN Single Window
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Indonesia’s Way Forward
A Three-Pronged strategic approach for
Investment upgrading
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Progressive Improvement in Investment Climates
• Mostly regulatory and institutional reform in both general investment
climates and infrastructure development.
• Infrastructure Policy Package was launched on February 16, 2006
• Investment Policy Package was launched on March 3, 2006
• Ongoing efforts to address corruption and high costs of doing business
Infrastructure Indonesia 2005 – 2006
• Indonesian government held Infrastructure summit twice: the 1st summit
was held on 17 – 18 January, 2005 and the 2nd on 1- 3 November 2006.
• Indonesia infrastructure Summit and Exhibition is the public and private
sector conference initiative of its kind, exclusively dedicated to
advancing Indonesia’s infrastructure development projects.
Improving access to financing and cost of financing
• Financial Sector Policy Package was launched on July 5, 2006: aims at
improving coordination between the Government and the central bank,
Bank Indonesia, and to continue reform steps to strengthen the banking
industry, non-bank financial institutions and the capital market.
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Indonesia’s Way Forward
New Investment Climate Policy Package
• Broadly Covers
• General Investment Law and Regulations
• Taxation
• Customs
• SME
• Consists both policy and institutional reforms for
creating legal certainty, policy consistency and
reduce the costs of doing business
• Short term measures on deregulation and reducing
red tape, and ongoing anti corruption drive
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Indonesia’s Way Forward
Improving Investment Climate
• New Investment Law: Just approved by the Parliament in March
2007
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More conducive environment for investment in Indonesia
Equal treatment between foreign and domestic investors
Clear definition of sectors closed/open with condition
Procedures for investment approvals will be streamlined
Protection from nationalization and expropriation
Incentives will be given to new investors for selected sectors (e.g.
Pioneer sectors) and regions: Fiscal, Immigration, Access to land etc.
• Improvements in trade facilitation measures
– National and ASEAN Single Window (one stop service for processing of import
and export documents/procedures)
• Batam Pilot, 2007 Tanjung Priok
• 25 government agencies (collection of documents, standardization)
– Transparency of standards
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Indonesia’s Way Forward
Special economic Zones:
islands of excellence and best practices
• The Government has recently announced plans to develop new special
economic zones. These will be located in certain geographical areas to
create hubs of economic development. The Government is focusing on
specific areas or ‘islands of excellence’ because it is easier to remove supplyside constraints from small geographical areas than the whole economy.
• Efficient regulation and licensing will be a crucial part of these new special
economic zones. Each zone will have a single zone authority which will
provide best practices in terms of services to investors. This will involve the
streamlined provision of necessary licenses and permits from the central and
local governments to operate in the zones, provide services to resolve
problems and provide an efficient supporting administrative services in
various areas such as customs, import and export procedures.
• The Government is currently working on a criteria to identify viable areas for
these zones. Some of the issues under discussion in developing the criteria
are areas which already have supporting infrastructure, a cluster of
supporting industries and access to inputs of production such as skilled labor.
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Indonesia’s Way Forward
Multi-track strategy in Trade Negotiations
Multilateral: World Trade Organization, Doha Development
Agenda
Regional:
• ASEAN Economic Community: goods, services (partial),
investment (partial), mutual recognition agreements,
customs procedures and ASEAN Single Window by 2008
• ASEAN China Free Trade Agreement (ACFTA): goods, and
beginning in services
• ASEAN Korea FTA (AKFTA): goods
• ASEAN India FTA (still in negotiations)
• ASEAN Japan FTA (still in negotiations)
• ASEAN Australia New Zealand FTA (AANZFTA) (still in
negotiations)
Bilateral:
• Indonesia Japan Economic Partnership Agreement (IJEPA) agreement in principle on major elements
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Summary
• Many benefits from trade integration
– Generally, increased competitiveness
• Major lessons are aimed at improving production
efficiency
– Diverse products, improve logistics, and improve
information technology
• ASEAN has some useful initiatives on a way forward
– ASEAN EC, 11 Priority Sectors, ASEAN Investment
Area, ASEAN Industrial Cooperation
• Indonesia has adopted effective reforms to
improve investment climate: Regionally and
unilaterally
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Thank You!
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