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Indonesia to Join Trans-Pacific Partnership Trade Deal

During his meeting with President Obama this week, Indonesia President Joko Widodo said his country plans to join the Trans-Pacific Partnership (TPP) trade deal agreed on earlier this month by the U.S. and 11 other nations.

The landmark trade agreement will reduce the cost of trade and encourage growth in the Pacific.

“Indonesia is an open economy and with the 250 million population we are the largest economy in South East Asia. Indonesia intends to join the TPP,” President Widodo said from the Oval Office after a private meeting with President Obama. The two presidents committed to strengthening and expanding their respective nations’ relationship.

But Indonesia’s joining TPP could be easier said than done.

Economic nationalism runs deep in the country, according to a Bloomberg article, and TPP’s further-reaching goals like putting safeguards in place for patents and leveling the playing field for companies competing with government-back business could prove problematic when it came to implementation in Indonesia.

Indonesia has 119 state-owned companies and joining the TPP would mean the country would have to allow for greater competition in procurement—a point of concern for Malaysia and Vietnam, which are already part of the deal.

“To what extent can Indonesia favor its SOEs under this agreement remains to be seen,” economist Jonathan Pincus, president of Indonesian public policy think tank Rajawali Foundation, told Bloomberg. “It’s a similar story to Vietnam. There is a big state-owned sector in Indonesia that has access to implicit subsidies and advantages in the market.”

Trade liberalization isn’t readily accepted in Indonesia either. To be a part of TPP, the country would have to reduce the amount of industries with restrictions on foreign ownership, which would require parliamentary approval and lobbying by local businesses and unions, and the move would likely garner resistance.

Dispute settlements could also be an issue, Bloomberg reported. TPP may include verbiage that would allow investors to settle breaches of investment protection in a third country or at the World Bank, but experts familiar with the matter have said Indonesia will be hard pressed to relinquish power of its domestic legal system.

Either way, despite its eagerness to participate in TPP, it’s not likely Indonesia or any new member nations will be able to apply for inclusion in the trade deal before the existing agreement takes effect, which experts predict could be as far off as 2020.