Indonesia Tightens Trade Links With Tunisia

Lili Yan Ing Jakarta The writer is lead advisor to the Trade Minister. The views expressed are personal.  

Apart from expanding in Asia, Indonesia has started to eye Africa as a market for its exports, one of the main drivers of the county’s economy.  President Joko “Jokowi” Widodo has intensified Indonesia’s relations with Africa.

Why should we bother about Asia and Africa? Well, Asia and Africa account for 38 percent of the world’s Gross Domestic Product (GDP), 76 percent of the world’s population, 44 percent of the world’s exports, 41 percent of the world’s imports and 35 percent of world’s foreign direct investment.

To cement Indonesia’s serious efforts to expand its trade with Africa, on June 25, Indonesia signed a Preferential Trade Agreement with Tunisia in Tunis. Indonesia and Tunisia share many values and interests in common dating back to Indonesia’s support for Tunisia’s independence. In 1960, Indonesia opened its embassy in Tunisia, and in 1987 Tunisia opened its diplomatic mission in Jakarta. Relations have strengthened with frequent high-level visits by politicians and diplomats.

These relations have been strengthened by the participation of the two governments in multilateral platforms such as the Organization of Islamic Cooperation (OIC) and the Nonaligned Movement. Indonesia and Tunisia have also expressed their support for one another in global fora: the United Nations Industrial Development organization, the International Maritime Organization, the Food and Agriculture Organization and the Inter-governmental Committee for Physical Education and Sport.

The economic ties have also been growing, especially after the signing of an agreement to eliminate double taxation and prevent fiscal evasion in 1992. In 2014, the Tunisia-Indonesia Business Association and the Indonesian-Tunisian Business Council were established. The two organizations aim to promote the two countries’ ties, especially in the economic sector.

There are two reasons why both countries need to be more engaged. The first is the role of each country in each region. Indonesia is a rapidly growing country with an average GDP growth of 5.2 percent for the last two decades, supported by a stable macro economy and the government’s pro-market reforms.  Indonesia currently ranks as the 16th largest economy in the world based on nominal GDP. By 2050, the IMF estimates Indonesia will be the fourth-largest economy in the world.

Indonesia has also shown its consistency in improving its investment climate. In 2016 Indonesia opened 45 business lines to increased foreign investment. And in terms of doing business, Indonesia has improved from 91st in 2017 to 72nd in 2018, aiming to be 40th in 2019. This gives greater opportunities for investors to invest in Indonesia.

Tunisian investors have started to invest in hotels and resorts in Lombok near Bali. Likewise, Indonesian investors have invested a total of $114 million in the energy sector.

Indonesia and Tunisia’s total bilateral trade value reached US$87.5 million in 2017.  Indonesia’s main exports to Tunisia are palm oil, yarn, coconut oil and fish, which are basically raw materials to support industries as well as the tourism sector in Tunisia. While Indonesia’s main imports from Tunisia are phosphates, electrical equipment, wood pulp, leather and of course, dates.

As the largest nation in Southeast Asia, Indonesia plays key roles in the region and beyond. Indonesia is a founding member of ASEAN, as well as the Asia-Pacific Economic Cooperation. Indonesia is also the initiator of the Regional Comprehensive Economic Partnership (RCEP), which combines ASEAN, China, India, Japan, Korea, Australia and New Zealand. The RCEP is currently under negotiations. Indonesia is definitely a very solid and promising gateway into Asia’s market.

Likewise, situated at the crossroads between Africa, the Middle East and Europe, Tunisia holds a special position as a gateway in the eyes of Indonesia.

Indonesia and Tunisia, and other African countries, are in an era when modern transportation as well as information and communication technology can help us to overcome geographic distances so that two-way business between Indonesia and Africa can further be intensified.

A trade agreement with Tunisia, and hopefully soon with other African countries such as Mozambique, Morocco, Kenya and others, will further foster trade and investment. Today, we are in a world where tasks are fragmented around the globe, we need partners to expand our businesses. We can grow stronger, but only if we work together. The trade expansion to Africa is needed to support the government’s target of economic growth of 5.4 percent in the next three years.

In 2017, Indonesia recorded a trade surplus of $11.8 billion, recording annual growth of 16.7 percent, the highest level since the global financial crisis.

Indonesia actively pursues engagement with trading partners. In December 2017, Indonesia signed the Indonesia-Chile preferential trade agreement and currently Indonesia is in negotiations with members of the RCEP, the European Union, the European Free Trade Association (EFTA) and Australia.