Dastardly “Free Trade” agreement will damage Indonesia in the long term – do not sign

Dian Islamiati Fatwa
PAN Politician

IO – On 14 November 2018, the Indonesia-Australia Comprehensive Economic Partnership Agreement (I-A CEPA) was slated to be signed. The signing was originally set to be done during the ASEAN Summit in Singapore, where the Australian PM Scott Morrison and Indonesian President Joko Widodo were scheduled to be present from Sunday (11/11/2018).

The spirit of the I-A CEPA is that of a comprehensive partnership. It contains not just the agreement to mutually sell and purchase goods, services, and investments – it is a much wider economic cooperation based on the principle of a “win-win solution”.

However, the Australian PM said that he would not hurry with the signing. He commented that Indonesia “sulks” and seeks to adjust the terms of I-A CEPA because Australia is considering moving its embassy from Tel Aviv to Jerusalem, to harmonize with American policy and Donald Trump.

Indonesia considers Australia to be insensitive to a delicate issue relating to the Israel-Palestine conflict. By moving their embassy to Israel to Jerusalem, Australia would acknowledge that Jerusalem is the capital city of Israel. This move would hurt the feelings of Indonesian Muslims who wholeheartedly support the struggle of Palestinians to achieve their independence. The Indonesian government’s attitude must be supported, because it is important to stand by one’s convictions and remain loyal to one’s friends, even though one is about to sign off a lucrative trade deal.

However, this fortunate delay is not what I will be discussing here. Why “fortunate”? My eyes widened in shock when I saw the terms and conditions of the I-A CEPA agreement. I really could not believe that Australia is ready to invest, purchase and control 67% (sixty-seven entire percent!) of share ownership in our mining, tourism, education, hospitals, pathological research, care of the elderly, telecommunications, energy, transportation, and construction businesses. They even intended to take up to 95% (ninety-five percent) energy share ownership for electrical generators that produce more than 10 Megawatt!

Now, we all know that even in a common business, more than 50% share ownership equals majority voting rights in the company. To bring it back to this international negotiation, using whatever calculation you use, a more than 50% ownership of any state assets is equal to handing over the State’s control and sovereignty to another country! Furthermore, to my amazement, Indonesia cannot ask for later divestment of these investments at lower than the figure agreed on in the I-A CEPA! If I-A CEPA does support the principle of partnership, can we really say that Australia’s 67%, undivestable investment to be a “win-win solution”?

It’s possible that the Indonesian government has its own method of calculation that they can defend against the fast-talking negotiators of the other side at the meeting table. However, how come the stakeholders are not involved in the negotiation? I have yet to hear any comments from Indonesia’s educational, mining, energy, medical, and construction stakeholders. Are they being excluded from these talks? Will they benefit from the free-trade agreement with Australia, which would open up the market and ownership of Indonesia’s strategic sectors?

Indonesia’s government remains silent about the negotiation process for this agreement. The official website of RI’s Department of Trade states only that “We are currently in negotiations.” Therefore, the Government says, we are keeping everything confidential. If that’s really the reason, why is the Australian Government open about it? Their website shows each step of the agreement for each stakeholder of each sector, for everyone to see and download if they wish. Why is our government so secretive about a negotiation that clearly relates to the livelihood of the many? If Australia is so open to its public, what is Indonesia keeping under wraps? I was forced to seek Australian media sources just to get an idea of what the I-A CEPA entails, instead of relying on Indonesian sources!

This 6-year free-trade negotiation between Indonesia and Australia seems to be forced. The Australia media report that the introductory agreement signed by Australian Premier Scott Morrison and President Joko Widodo in Jakarta at the end of August 2018 is actually only one page long. Ironically, the kemendag.go.id. website, which is the Ministry of Trade’s official website, prominently displays a “Report of the Results of 4 Years of Jokowi-JK Government” that includes a section called “Fair Energy”. Now, if the Ministry of Trade’s negotiators allows for an agreement of 95% (ninety-five percent) undivestable energy share ownership by the other country, how can we call it “fair”?

In view of these facts, isn’t it natural that many people scrunch their foreheads in wonder? Isn’t it only natural that many people should conclude that Joko Widodo is in a rush to get things done in preparation for the Presidential Elections in April 2019?

Statistics Indonesia (Badan Pusat Statistik – “BPS”) data so far recorded that Indonesia’s exports to Australia in Semester I of 2018 were USD 1.34 billion, but our Australian imports totaled USD 2.71 billion. This means that Indonesia suffers a trade balance deficit of USD 1.37 billion from Australia!

Yes, there have been changes. Current deficit rates are 18.11% lower than in 2017. However, Australia clearly benefits more from trade with Indonesia, especially for food imports such as the import of beef and wheat. The entry tariff to Indonesia is set to be 0% with free trade. On the other hand, Australia is a small market for the livestock and food crop industry, because they only have 25 million citizens. That’s not even 10% of Indonesia’s numbers. If Indonesia does not watch out, this deficit will grow much bigger.

I suppose that the most painful surprise of all is that according to my sources at the Department of Trade, Indonesian negotiators frequently don’t know what to negotiate because they do not have sufficient data. This means that our Ministry – and by extension our Government – gambles with the livelihood of the many without any reliable navigation data! Therefore, with all due respect to our negotiators who have been fighting so hard, this free trade agreement is ridiculous and dangerous at the same time. We are getting carried away and stupid if we allow this 67% share ownership. Have mercy on our children and grandchildren if we sign this agreement. We should heed what the British philosopher Edmund Burke said instead: “Free-trade is not based on utility but on justice.” The I-A CEPA Free Trade is not an agreement based on justice, but a duplicitous “free trade” that we really should never agree to sign.