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Indonesia may hope investment in textile sector from RCEP, not synergy

Release time:

2023-01-11

Indonesia's parliament has sent a green signal to the country to join the Regional Comprehensive Economic Partnership (RCEP) trade pactThe country wants to boost trade and foreign direct investment in varous fields. The lndonesian textle industry may also want higherinvestment, but government policies may not encourage svnergies within the EU.
With its addition, Indonesia becomes the latest Southeast Asian country to join the world's largest trading bloc. Originally signed in Novembei2020 by the leaders of 15 Asla-Pacific countries, including all 10 members of the Associaton of Southeast Asian Nations (ASEAN). the RCErmega agreement covers neary one-third of the world's populaton and a simlar proportion of the tota , ncome domestic products. in addition toASEAN, the acreement includes Australia, China, Japan, New Zealand and South Korea 一 but not the United States.

Indonesian Trade Minister Zukii Hasan said in pariament that oining RCEP wil boost trade and foreian direct investment in indonesia.Healso predicted that this would boost the countrv's annual GDP growth rate by 0.07%, The main producton areas in ndonesia are textiles ancclothing, circular kniting machines. fleece fabrics, electronics. iycra accessories automobiles. footwear, food and beverages. and chemicalsThe countrv's trade-to-GDP ratio of 40% is below the alobal average of 55% to 60%, underscoring lndonesia's poor intecration into globasupply and value chains.

Separately, Economic Afairs Minister Airanqga Hartarto told a news conference that the trade deal wil cive indonesian industries. includinoishing, plantation and automobile manufacturing, better access to the markets of RCEP members such as China, Japan and South Korea.

Indonesia is an important exoorter of textiles, exporting to many countries such as Australia, Japan.New Zealand. South korea and Singaporewhich are part of RCEP. By oining RCEP, Indonesia wil gain more access to member markets. This means that the lndonesian textile industvymay expect higher exports.

However, there may be no synercies for EU textile exporters due to indonesial's policy of discouracing exports of raw materials ancntermediare products. Thailand. Vienam. vanmar. the phi ipoines and Cambodia are RCEP members and are compettors in the ndonesiantextile industry.

RCEP may help indonesia attract investment in the textile industry from other competing countries as lndonesia looks to add value to rawmaterials. The ndonesian government is currently inviting global investors for ocal production.In addition, the country has restricted exports oiraw materials as a long-term policy.