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The slow progress of Japan’s Economic Partnership Agreement with Indonesia, Philippines and ASEAN

Updated On: Dec 01, 2006

On his first official visit to Japan on 28-29 November, Indonesian President Yudhoyono held a meeting with the Japanese Prime Minister Shinzo Abe in Tokyo to discuss, amidst other matters, the status of the Japan-Indonesia Economic Partnership Agreement (JIEPA). The Japanese Emperor and Empress also hosted a banquet for the visiting Indonesian President.

Both Japan and Indonesia agreed to accelerate the negotiations of the JIEPA and wanted the JIEPA to come into effect by early 2007. The importance of the EPA for Japan is tied to the presence of energy resources. Japan has relied heavily on Indonesia for its LNG supply. Indonesia is Japan’s largest LNG supplier, accounting for 24% of its imports. Hence Japan has been concerned about Indonesia’s recent announcement that export of LNG would be reduced by up to 60% because of a growing demand for energy in IndonesiaJapan’s ability to secure energy resources has increasingly been called into question. It had not been able to work out with the Russians over the development of oil and natural gas fields in the Russian Far East nor has its development of the Azadegan oil fields in Iran been fully settled.

The Tokyo meeting has been a disappointment for Japan since Indonesia could not confirm that it would be able to check the reduction of the supply of LNG toJapan. The final joint statement said, “Given the strategic significance of energy and mineral resources for sustainable economic growth in this region, both sides will ensure close coordination to promote and facilitate investment in this sector, and to contribute to enhancing security of supply of energy and mineral resources.”  The Indonesian Trade Ministry’s special advisor on International Affairs, Hailda Milyani explained to reporters that, “We are in no position to guarantee a stable supply of energy to any nation, except as regards what has already been agreed under contract.”

Other than the element of energy, the EPA would also mean that 93% of Japanese imports from Indonesia would be reduced in tariffs. Agricultural products will have their tariffs reduced. Indonesia, on the other hand, will remove around 35% of its tariffs on goods imported from Japan immediately and the rest over 3 and 15 years.Japan also agreed to provide more economic concessions such as the relaxation of immigration laws to allow Indonesian nurses and hotel trainees to work in Japan. The latter is likely to be similar to the EPA signed between Japan and the Philippines. The Japanese had allowed up to 1,000 Filipino nurses over two year to work inJapan.

The Japan-Philippines EPA (JPEPA) is currently undergoing a ratification process in the Philippines Senate. However, the ratification for the agreement has reached some difficulties over concern of the possibility of Japan exporting waste to the Philippines. The chairman of the trade and economic affairs committee, Senator Manuel A Roxas II, did not seem convinced of the overall positive impact of the EPA on the Philippines. The chairman of the environment and health committees, Senator Pia S. Cavetano also said that she was “not inclined to support” the JPEPA because, “despite seeing the economic benefits, it’s important that we include in making this decision [whether to ratify JPEPA] the [ecological and social impact].”

The difficulties surrounding Japan’s EPA with Indonesia and the Philippines do not augur well for the Japan. Its EPA with Thailand has been postponed after the military coup in September this year. The ASEAN-Japan EPA (AJEPA) has also hit the rocks after the Japanese government suggested that it would be exempting over 500 products from the AJEPA. Despite the Japanese government’s assurance that the excluded products would only constitute 1% of the ASEAN-Japan’s trade, some of the ASEAN members are unlikely to buy that argument.

The slow progress of the AJEPA could also be due to the fact that the various ASEAN members and Japan have put their focus on the bilateral EPA rather than the regional one. The deputy director-general of the Thai Trade Negotiations Department, Winichai Chaemchang, commented that Japan might concentrate less on the regional trade agreement due to its belief that Japan would be able to benefit more from the bilateral EPAs it has with the individual ASEAN members. Wincihai also cited the case of Thailand as being able to benefit from the bilateral EPA than the regional EPA, saying, “Thailand can have more of its products access the Japanese market under a bilateral trade pact. The tariff rate for some exports, particularly agricultural goods, would be lower than [that offered to] other ASEAN members.”

Sources:

The Tokyo Mission (Jakarta Post, 29 November 2006)

RI, Japan Agree on Economic Partnership (Jakarta Post, 29 November 2006)

Jakarta Guarantees Energy Supplies for Tokyo (Straits Times, 29 November 2006)

Agriculture Steals the Show (Jakarta Post, 28 November 2006)

Yudhoyono Pursues Trade, Arms (Straits Times, 27 November 2006)

Yudhoyono To Sign Trade Pact With Japan (Straits Times, 27 November 2006)

Senate Sets the Stage to Debate Japan-RP Trade Pact (BusinessWorld, 28 November 2006)

ASEAN-Japan Talks on Shaky Ground (The Nation, 28 November 2006)







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