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Trade Minister Mari Elka Pengestu says the government cannot
sign a much-awaited Economic Partnership Agreement (EPA) with Japan by
the year's end unless the House of Representatives speeds up the
passage of the new investment bill.
The bill is essential if the government wants to enter into bilateral
deals without fear of violating the existing investment legislation,
Mari told reporters Tuesday.
"We are still waiting for the investment bill to be passed. We just
don't want any bilateral agreements to run foul of the current
Investment Law," she said.
The government submitted the investment bill to the House in mid-2005
for deliberation. However, little progress has been made to date with
legislators apparently reluctant to accelerate its passage.
Delays have also been caused by disagreements among senior government
officials over certain aspects of the bill, particularly proposals to
reduce the licensing powers of the Investment Coordinating Board (BKPM).
Sources at the BKPM says that Mari wants the agency to come under her
authority, with its tasks confined merely to promoting investment in
Indonesia overseas. However, BKPM chairman Muhammad Lutfi wants
otherwise.
Lutfi wants to maintain the powers of the BKPM, and appears
uncomfortable at the prospect of having to play second fiddle to the
minister.
The government had hoped that the investment bill would be passed this
year so that it could come into effect in early 2007. The bill is
essential to attracting more foreign investment, a prerequisite for
higher economic growth.
Other factors slowing down progress on the EPA relate to protectionism,
with both Indonesia and Japan holding out for the protection of various
sectors, as well as disagreements on the products that will benefit
from freer trade.
"We are still negotiating about which products can enter both countries
and the level of protection that will be permitted. Japan has several
sensitive areas related to agricultural," said Mari.
Indonesia and Japan agreed in July last year to begin working toward
the signing of an EPA, a comprehensive bilateral economic agreement
that would include not only the liberalization of trade in goods and
services, but also cooperation in the fields of investment, competition
policies and the movement of people.
Japan is Indonesia's largest trading partner. Two-way trade amounted to
US$24.9 billion last year, with an $11.1 billion surplus in Indonesia's
favor. Japan is also among Indonesia's largest investors, with approved
investment plans amounting to $1.68 billion last year
Mari said the EPA and a free trade agreement were basically the same in
nature, but that the EPA would have greater scope than an FTA as it
covered not only economic and trade issues, but also technical
assistance.
Meanwhile, Vice President Jusuf Kalla said prior to a working meeting
at the Trade Ministry that the government hoped to be able to clinch a
deal with Japan on the proposed EPA by the end of this year.
He said there were still several issues that had to be discussed,
especially as regards agriculture and industry, and raw materials from
Indonesia.
While admitting that Indonesia was lagging behind compared to its peers
in Southeast Asia in inking trade deals with developed countries, he
said this was because the problems faced by Indonesia were more
complicated and greater in scale.
"We will be surrounded by free trade deals. We must seek ways of
competing with them, but at the same time we must also consider how to
protect our agricultural sector, and small and medium enterprises,"
said Kalla.
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