Trans-Pacific Partnership (TPP) in Indonesia's Economic Development Strategy

08 Oct 2018 - 08 Oct 2018

Trans-Pacific Partnership is a trade agreement involving 12 countries across the Pacific Ocean. Seven of those countries are located in East Asia, including four ASEAN countries. The remaining five countries are spread across America’s continent. Together these 12 countries account for 40% of the world’s GDP and are responsible for about one-third of the global trade volume. After four years of tough negotiation, an agreement was finally struck on 5th October 2015.

TPP is often considered as a model for international trade agreements in 21st century, due to its comprehensive and deep scope. In this agreement, trade liberalization is no longer regarded as an issue in the negotiation, but it is deemed as a prerequisite. Furthermore, TPP has a significant potential to be an integrated trade zone. According to a study by Peterson Institute for International Economics, free trades among TPP countries are estimated to engender potential gain of almost USD 2 trillion by 2025. Moreover, this arrangement will provide TPP countries with opportunities to create economic activities and international business model, because TPP is also demanding regulatory and policy coherence of its member countries.

Indonesia’s intention to join TPP is highly reasonable as TPP will provide opportunities to increase market access of Indonesia’s products to other, more economically advanced countries. Indonesia can also enhance its participation in global production network, which is also beneficial for domestic industry development. Furthermore, there might be a potential loss for Indonesia of not joining the TPP. This loss may come from trade diversion, as countries switch their trade partners from Indonesia to other TPP countries due to facilities and incentives provided by the arrangement. In addition, investment diversion may also happen in favor of TPP countries. The important point is, does Indonesia really have the willingness and capability to conduct various reforms as part of its commitment to join the TPP?

CSIS, in collaboration with Lembaga Penyelidikan Ekonomi Masyarakat Fakultas Ekonomi dan Bisnis Universitas Indonesia (LPEM FEBUI), Pusat Studi Perdagangan Dunia Universitas Gadjah Mada (PSPD UGM), Centre of Economic Development Studies Universitas Padjajaran (CEDS UNPAD) and Prasetiya Mulya School of Business and Economics (PMSBE), is conducting a research with the topic of “Trans-Pacific Partnership (TPP) in Indonesia’s Economic Development Strategy”. The study will provide reviews and thorough analysis on several aspects related to TPP and Indonesia’s strategy for it, which specifically include topics such as Export Potential, Impact Mitigation of Liberalization, Services, Global Value Chain, Investment Opportunities, Competition Policy, State Own Enterprise, Intellectual Property Rights, Investment Protection, Politics, Labor and Environment Standards. Finally the result of the study will be disseminated through various seminars and discussions on several specific aspects of the study.