Close cooperation with the EAEU is important for Indonesia because it needs to diversify its market – Ex-Minister of Finance of Indonesia

In 2015 the EAEU signed an Agreement on Free Trade Zone with Vietnam, earlier this month a similar document was signed with Iran. And last year Indonesia also applied to EAEU for discussing a free trade zone. According to the Minister for Foreign Affairs of the Republic of Indonesia, Belarus is one of the key partners of Indonesia in EAEU in many areas. Muhamad Chatib Basri, Ex-Minister of Finance of the Republic of Indonesia (2013-2014), told «Eurasia.Expert» about the current Indonesian-Belarus trade and economic cooperation, the development of the relationship between Indonesia and EAEU and about the prospects of the ASEAN – EAEU cooperation.

- Mr. Basri, the Minister for Foreign Affairs of Indonesia stated that Belarus is Indonesia's main partner in the Eurasian Economic Union. As far as I know, Indonesia buys potash fertilizers. What else do both countries trade? What dynamics can be traced? What is the trade turnover between Indonesia and Belarus?

- I can see a lot of potential to enhance trade relationship between Indonesia and Belarus. We import potash and also heavy duty vehicle for the coal industry. Belarus has a comparative advantage in defense technology, heavy equipment and other manufacturing, whereas Indonesia has comparative advantage on primary products including minerals. At this stage, our bilateral trade is still relatively small, so there is a lot of room to increase.

- In October 2017, the sixth meeting of the intergovernmental Belarusian-Indonesian joint commission for trade, economic and technical cooperation was held in Jakarta. An agreement was reached to intensify trade, economic and investment cooperation between the countries, including prospects for increasing supplies to Indonesia of MAZ, BelAZ and MTZ products. What has been done in this direction, what are the opportunities and obstacles on this path? 

- I think both sides, not only from Indonesian but also from the Belarusian side need to push further for this agenda. One of the biggest obstacles is the limited information that is available about Belarus.

Not many people here in Indonesia realize that both countries have big potential markets. As for Indonesia, Indonesia is the largest economy in ASEAN. ASEAN is a big market with 600 million people. On the contrary, not many people in Southeast Asia realize that in terms of GDP per capita, the Eurasian common market economic union has even a higher GDP per capita than ASEAN. Thus, it is very important for both regions, ASEAN and Eurasian Common Market, to improve the relationships and share more information. The similar thing also applies for Indonesia and Belarus.

As I said, not many people realize that we do have potential trade with Belarus, including palm oil or equipment for minerals. So my suggestion is: take more initiative to promote trade between these two countries.

- How do you assess the prospects for multilateral cooperation between the Eurasian Economic Union and the Association of Southeast Asian Nations?

- This is really the potential in the future as I said, because ASEAN in the region is about two trillion GDP right now. If you look at the Eurasian it is about 2.3 trillion now. If you are talking about population, the Eurasian Union is the largest emerging market in the world right now. It is 17% of the population. At the same time in ASEAN we have about 600 million population, in terms of income per capita, it is about $4000, the Eurasian common market is about $10 000. As I said, not many people in Southeast Asia realize this. Indonesia needs to increase its export, for example, palm oil, minerals. At the same time, because Belarus and Eurasian Economic Union have the comparative advantage in technology, we can have a gain from trade. But, again, I think the problem is the lack of information and promotion. The other problem is about geography.

But, if ASEAN can trade with US, which is geographically far, why not we do trade with Eurasian Economic Union?

- In your opinion, can the Eurasian Economic Union and Indonesia sign an agreement on a free trade area? At what stage are the negotiations?

- I think we need to explore this agenda. From trade perspective, as I said, we can see the potential between both parties. Both Eurasian Economic Union and Indonesia has a big market.

Our current trade with EEU is $2.3 billion. This is considerably small for that market size.

So, we should amplify this, we should increase the value of trade substantially. In fact, EEU has higher GDP per capita than ASEAN, so there are many opportunities there. The similar thing also applies for EEU on ASEAN. So, we need to explore and pursue this agenda further. Unfortunately, we are still in the infancy stage, due to our limited knowledge and lack of marketing and promotion. Our knowledge is limited, about logistic, the geographical issue, this is what should be addressed before going to the free trade area.

- How does Indonesia assess close cooperation with the Eurasian Economic Union?

- I think this is important because Indonesia needs to diversify its market. Especially today we see the risk of trade war between US and China. A country like Indonesia cannot rely only on US or China, we need to diversify our export. As I said, our export to the Eurasian economic union is very small, about $250 billion. so very small, so I could see that the EEU as a potential.

- What products can Indonesia offer the countries of the Eurasian Economic Union? How can Indonesia attract the Eurasian market?

- I have mentioned about this earlier, we buy fertilizers, potash, we buy heavy equipment from Eurasian market, guns riffles. Our export is mostly palm oil, minerals, garment, footwear, motorcycle. Maybe Indonesia can offer these products. For EEU investors, there are many opportunities to invest in Indonesian infrastructure projects.

- How do you access Russia-Indonesia relations in the economic field?

- I think as I said, not many people realize the potential. But I believe that this close cooperation with the economic union is very important. I remember in the past Russia was interested in investing in oil and gas, railway, maritime, energy and electricity. So there is a lot of potential.