At the recently concluded World Economic Forum in Davos, Switzerland, Indonesia’s trade minister Muhammad Lutfi spoke extensively on the topic of free trade, serving as a panel for the forum “Will World's Biggest Free Trade Deal (RCEP) Succeed?”
On RCEP, the minister responded to a comment by Tak Niinami, CEO of Suntory, who said that the success of RCEP hinges too much on China, a country which many countries don’t trust.
Indonesia, being a good friend of China, disagrees, and points out that success or failure is up to the individual countries to decide.
“There’s a graph by a Dutch institute or think , and it shows that because of China (referring to China's zero-Covid policy lockdowns), every country in the world is coming back with the global value chain, except China. They have their own way of taking care of the economy.
“But for countries like Indonesia, this is a golden opportunity. We look for example the automotive industry in Europe, before Covid and after Covid, the market grew by 8 percent, but the supply industry only grew by 3 percent. The (Indonesia’s own) numbers show the same thing.
“We are producing cars, we are beating Thailand now. Before Covid we sell about USD 8.8 billion. It dropped by 20 percent but coming back, it grew only 2.7 percent. You know what happened? They are coming back to invest in Indonesia! So I am very optimistic of this, this is what we call new equilibrium,” said the Minister.
The Minister added that Indonesia now has a trade surplus of USD 1.1 billion against China, a first in more than a decade.
“Indonesia right now, a country that has a trade balance of minus 15 billion for, I don’t know, 10 or maybe 12 years, (but) last year, (it's) almost even. Today, first quarter USD 1.1 billion surplus,” said Minister Lutfi.
Since the forum is about promotion of free trade, Indonesia’s recent decision to ban export of palm oil to control rising prices (in another session, Indonesia’s ban on nickel exports was also mentioned), was put on the spotlight.
Supply of automotive parts are still unreliable not just because of the war in Ukraine (which supply majority of the world's automotive wire harness), but also lockdowns in China, as the the latter is pursuing a zero-Covid tolerance policy.
European countries say Indonesia is destabilizing trade and upsetting the global supply chain of edible oil, to which the good minister juxtaposed it against European countries hyprocisy of hording Covid-19 vaccines, to the detriment of developing countries like Indonesia.
“It depends on who is saying it. When the Europeans, when the Americans, when the developed countries do it, for example, do you know at one point, back in July, last July, the Europeans own 3.7 times more vaccines than their population, and they call it security. When Indonesia is doing it, that’s called protectionism.”
He then went on an intellectual sparring match of sorts with Professor Simon Evenett, from the University of St. Gallen, Switzerland, who expressed a very typical white, male-centric worldview, you can watch the rest of the discussion in the video below.
Keyword: Indonesia's trade minister: China's auto supply chain problems is an opportunity, shuts down criticisms from Europeans