Forget about competing with China - Indonesia lags behind Vietnam, Thailand and Malaysia in terms of trade and investment relations with EU member countries, an EU study revealed Tuesday.
Despite being the largest economy in Southeast Asia, the volume of trade and investment between Indonesia and EU member nations remains low, with the EU study recording European foreign direct investment in the country trailing FDI in Singapore, Thailand and Malaysia.
From 1996 to 2006 accumulatively, Indonesia was in fifth place for total FDI from the EU, with US$19.62 billion, less than the $20.59 billion recorded by Vietnam, where European nations have invested significantly more since 2002.
During the January-September period this year, the Trade Ministry says, exports to Europe dropped by 16 percent from a year earlier, while imports from the EU plunged by 18 percent.
Trade volume with EU nations during this period was only about 14.3 percent of Indonesia's overall foreign trade.
The EU's study on challenges and opportunities for trade and investment in Indonesia revealed the low trade and investment with Indonesia was apparently due to classic problems left unaddressed, including graft, poor governance, and lack of transparency and certainty.
"Those were part of several key factors behind the relatively low level of EU trade and investment in Indonesia that we have identified in our study," Julian Wilson, ambassador of the delegation of the European Commission to Indonesia and Brunei, said in a seminar on Tuesday.
Other key obstacles and constraints identified by the study include the lack of trade facilitation, poor customs administration, uncertain tariffs, import controls on certain commodities and lack of transparency in government procurements.
Further problems highlighted include poor infrastructure, ambiguous and overlapping regulations between agencies at the central and local levels, and restrictions on foreign ownership in certain business sectors.
These obstacles and constraints, Wilson said, might be the reasons why the EU traded and invested more with Indonesia's smaller neighbors or with other emerging markets of a similar size as Indonesia.
"The EU, however, still sees Indonesia's growing prospects," he said, as long as Indonesia was willing to reform its business and investment climate and deepen integration in trade in services and investment.
Top European investors here include the UK with $1.04 billion of investment, or 62.9 percent of the EU's total investment in Indonesia in 2006.
Wilson added the EU was eyeing greater investment volume in Indonesia's five most promising areas: power generation equipment, non-electrical machinery, consumer goods, pharmaceutical products, and telecommunications equipment and services. (bbs)