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With greater market access, Vietnam a ‘threat’ to Indonesia

Jan 28. 2016
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By Khoirul Amin
The Jakarta Post

JAKARTA - Indonesia needs to catch up with neighbour Vietnam in obtaining greater global market access and accelerating trade negotiations with trading partners, Trade Minister Thomas Lembong has said.
The minister said Wednesday that Vietnam had become a real “threat” to Indonesia as the mainland Southeast Asian nation had concluded trade arrangements with the European Union (EU) and was also a signatory to US-led Trans-Pacific Partnership (TPP). 
“Given this circumstance, we’re already losing in terms of tariffs to Europe by between 10 and 17 per cent,” he said during the opening ceremony of the Trade Ministry’s annual working meeting.
Vietnam concluded a free trade agreement (FTA) with the EU in early December last year, and both parties are now ratifying the deal. 
The agreement includes the elimination of nearly all tariffs, in which Vietnam will liberalise tariffs over a 10-year period and the EU will liberalise tariffs over a seven-year period. 
It also covers non-tariff barriers to trade and other trade-related aspects such as public procurements, regulatory issues, competition, services, investment, intellectual property rights and sustainable development.
According to the European Commission’s data, Vietnam’s exports to the EU have gradually increased from 18.6 billion euros ($20.2 billion) in 2012 to 22.2 billion euros in 2014.
Indonesia’s exports to the 28-member bloc, meanwhile, have stagnated, from 15.5 billion euros ($16 billion) in 2012 to 14.4 billion euros in 2013 and 2014. 
Vietnam is also set to gain greater and easier market access to the other 11 TPP nations, namely Australia, Brunei Darussalam, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore and the US. 
For Indonesia, Vietnam has long been one of its head-to-head competitors in exporting textiles and garments, particularly to major markets like the US. Once the TPP is implemented, it is believed that Vietnam will grab an even larger share of the US market. 
Vietnam’s share of the US apparel import market could go from 10 per cent to 35 per cent. The reductions in duties that the TPP may cause could trigger a significant shift in sourcing to Vietnam from other countries, according to the consulting firm O’Rourke Group Partners, Limited Liability Company as quoted by AmCham Vietnam. 
Thomas said that Indonesia would strive to catch up so that it would not be left behind. “For sure, this will require huge economic reform, including reform to conventional (policies),” he added. 
He explained that the government would continue working to reach deals on a number of trade talks, including those with European Union and Asean partners [under the regional comprehensive economic partnership (RCEP)], to provide greater market access for local exporters. 
In this year’s working meeting, the Trade Ministry brought several big issues to the table for discussion. Alongside regional and overseas trade representatives and business players, the ministry discussed the expanding role of social media, global market access and the trade in services.

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