Menara KADIN Fl. 29, Jakarta Wednesday, February 15, 2012

On February 15, 2012, the Trade Knowledge Network (TKN) Southeast Asia held the first in a series of roundtable discussions on trade, economic integration and sustainable development in Southeast Asia, organized in partnership with the Indonesian Chambers of Commerce and Industry (KADIN), and Oxfam. The discussion focused on Indonesia’s recent protectionist measures, and what these mean for economic integration in the Southeast Asian region.

Protectionism is currently gaining ground in of the wake of the global economic crisis of 2008/09 (France 24, 2011). Indonesia is not an exception to this trend, having employed a number of non-tariff measures to protect its domestic economy, including strengthening of the use of the Indonesian National Standard (SNI, or Standar Nasional Indonesia) and expanding quarantine requirements for various import products (Jakarta Post, 2011).

Indonesia has long had a mixed approach to economic liberalization. Despite extensive liberalization in the mid-1990s and early 2000s, Indonesia has imposed different types of barriers to shield its local market. From the widespread opposition to the implementation of the Association of Southeast Asian Nations (ASEAN)–China Free Trade Agreement (ACFTA) in early 2010 to the more recent imposition of non-tariff barriers, economic nationalism remains strong in Indonesia. At the same time, however, Indonesia has championed economic liberalization in a range of regional and international economic forums, such as ASEAN, Asia–Pacific Economic Cooperation (APEC), the World Trade Organization (WTO), and the Group of 20 (G-20).

The roundtable discussion opened with observations from Maria Monica Wihardja from the Jakarta-based think tank, the Center for Strategic and International Studies (CSIS), and Herry Soetanto, the Head of International Trade Research and Development of the Ministry of Trade of the Republic of Indonesia.

Dr. Wihardja observed that Indonesia is backtracking from many of its committments on trade liberalization. She referred to the difficult and complex process of implementing ACFTA in 2010, when the government was under intense public pressure to withdraw from the arrangement. However, she argued that public pressure to implement protectionist measures will diminish as Indonesia becomes more competitive internationally. Consequently, Dr. Wihardja argued that domestic reforms aimed at enhancing Indonesia’s competiveness are key to avoiding the trap of protectionism. She concluded that “it is okay to say ‘we are not ready and still need to protect domestic markets,’ but don’t make FTAs a scapegoat” for Indonesia’s failure to enhance its competitiveness.

Mr. Soetanto began his analysis by clarifying the position of the government. In his view, much of the concerns highlighted by non-state actors, be it about the excess of protectionism or liberalization, have been taken account by the government, and these are reflected in the government’s trade policy. Unfortunately, the government is often trapped in the ideological dichotomy of liberalization and protectionism. As much as possible, therefore, the government should aim to pursue a balanced approach in its trade policy in an effort to satisfy the divergent interests of domestic stakeholders.

Participants included officials from the Ministry of Trade, representatives of the business community, research institutes, the news media, and international organisations. The diversity of the audience resulted in a lively debate around the pros and cons of protectionism. Indeed, while those from the protectionist camp argued that Indonesia’s inclination towards protectionism can be justified on the ground that similar policies have been pursued in other more developed economies, those in favor of greater liberalization maintained that many of the problems confronted by the Indonesian economy cannot be blamed merely on liberalization, but more on its inability to address domestic issues, such as corruption and lack of policy coordination.

France 24. (2011, December 15). Protectionism gaining ground, WTO Ministers warn.

The Jakarta Post. (2011, January 4). Great wall of trade barriers planned.