Indonesia-EU relations: Stage set for big leap in the year 2005
Veeramalla Anjaiah, The Jakarta Post/Jakarta
Indonesia, the world's fourth-most populous nation, and the world's most powerful regional grouping, the European Union (EU), opened a new chapter in their bilateral relations in 2004 by increasing their interaction on economic and political fronts.
Indonesia's trade with the Europe has been growing since the Asian financial crisis in 1997, a top EU official says.
"In 2003, the value of EU imports from Indonesia stabilized at around 10 billion euros (US$12.5 billion), confirming the trend of the last three years and representing a 40 percent increase," the first secretary of the EU delegation to Indonesia, Raffaele Quarto, told The Jakarta Post.
"This compares to the pre-crisis level EU exports to Indonesia, which were also relatively stable at around 4 billion euros, compared to the 7 billion euros in 1996."
The EU is Indonesia's second-largest trading partner after Japan and a main destination for Indonesia's main exports -- agricultural goods, textiles, heavy machinery, chemicals and energy -- with the balance of trade always in Indonesia's favor (see graph).
Thanks to a stronger euro against the greenback, Indonesian exports to these markets are set to increase in 2005, while imports may decrease in the future because of a weak rupiah.
EU nations saw Indonesia's first-ever direct presidential elections in 2004 positively and the country was emerging as a formidable democratic state, Quarto said.
President Susilo Bambang Yudhoyono's government and its commitment to economic and political reform had also drawn the attention of the European investors, he said.
"After the formation of the 'business and market-friendly Cabinet,' we believe investors from the EU countries will come back to Indonesia next year," Quarto said.
The investors -- mainly from Britain, Germany, France, Italy and Poland -- wanted to invest in areas like oil and gas, telecommunications, the retail sector, energy, defense and the banking sector, he said.
Since the crisis, Indonesia has experienced political upheavals; three different presidents in six years; terror attacks, legal uncertainty, regional autonomy that has perplexed potential investors, along with labor unrest and a decline in law and order.
As a result, foreign direct investment has been declining in recent years.
In 2002, EU investment in Indonesia dropped to 362 million euros from 698 million euros in 1999.
Indonesia, a country with 220 million population and abundant natural resources, and the EU -- a grouping that has some 455 million people in 25 member states with a combined gross domestic production (GDP) of 10 trillion euros -- needed each other to foster stronger economic ties, Quarto said.
However, stronger economic ties are not enough to form a strategic partnership between Indonesia and the EU, given the fast-changing political landscape of Asia, and the two parties have taken steps to strengthen their political ties.
Through its Council of Ministers of Foreign Affairs, the EU had announced it wanted a united, democratic, stable and prosperous Indonesia. It also supported Indonesia's territorial integrity, Quarto said.
Indonesia, meanwhile, has prepared itself to tap into the opportunities of the EU after the enlargement in May 2004.
With a series of seminars, photo exhibitions and arts performances, a "Europe Week" was held in Jakarta to mark the enlargement.
As part of this relationship building, Dutch Foreign Minister Bernard Bot, whose country holds the Presidency of the European Union, visited Jakarta twice --- first in August and later in October -- meeting President SBY and Hassan Wirayuda.
EU trade commissioner Pascal Lamy, meanwhile, went to Jakarta in September 2004 to attend ASEAN trade ministerial meeting, while commissioner on external relations Chris Patten earlier came to the city in June to attend the ASEAN post ministerial conference and ASEAN Regional Forum meetings.
In July, the European Commission (EC) -- the executive arm of the EU -- and Indonesia signed an agreement to launch the two- year National Indicative Program (NIP).
The EC allotted 72 million euros in financial grants to Indonesia (for the period 2005-2006) -- money to improve the rule of law, security and public finance management.
The NIP is a part of the EC's Country Strategy Paper (CSP), which was adopted in June 2002.
"The EC has so far contributed around 400 million euros for development assistance to Indonesia during the last 27 years," the EU Delegation's acting charge d'affaires Ulrich Eckle said.
The biggest contribution from the EU in 2004 was its assistance to the Indonesian elections, donating 7 million euros to help their organization and sending its largest-ever election observation mission to monitor the April 5, July 5 and Sept. 20 polls.
Through a range of programs, the EU wanted to support reform efforts, particularly in the field of judicial change, good governance practices, along with measures to fight graft sustainable management of natural resources and poverty alleviation, Eckle said.
In an effort to promote mutual understanding and respect between the people, the EU encouraged people-to-people dialog, cultural interaction and meetings between legislators, religious groups and civil society, he said.
Indonesia and the EU have agreed to hold political meetings involving senior officials every year. The last meeting was held in Yogyakarta in May.
"This new format reflects the agreement on both sides to strengthen Indonesia-EU relations," Indonesian Foreign Minister Hassan Wirayuda said.
There is also a ministerial-level meeting in which the EU Troika and Indonesian Foreign Minister are the participants.
The troika meeting, held in November, comprises the sitting EU Council Presidency, the member state which takes the future presidency and the EC.
While there many cultural contrasts between the EU and Indonesia, delegates from both sides say these difference are also strengths, and they are upbeat about the relationship's future; a partnership for prosperity and peace.