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Despite some obstacles, the country is expected to be the third country in Southeast Asia to ratify the mega trade deal.
A stunning sunset over Tanjung Priok Harbor, north of Jakarta, Indonesia, on July 5, 2018.
On August 25, Indonesia’s Minister of Commerce, Muhammad Lutfi, defended the shrinking of the Indonesian Legislative Assembly’s (DPR) space to ratify the Regional Comprehensive Economic Partnership (RCEP) industrial agreement. In his speech to the DPR’s Commission VI, which is guilty of legislative oversight of industrial agreements, Lutfi argued that RCEP would gain advantages for Indonesia, promising to strengthen its role in regional origin chains and improve its economic functionality amid the COVID-19 pandemic.
For RCEP to enter into force, at least six ASEAN countries and three spouse countries will need to ratify the agreement through their respective national processes. Singapore and Thailand have already ratified it, as have China and Japan, and Australia, New Zealand and South Korea want to ratify it to reach their goal.
Counting ASEAN is more complex, but there are reasons to be optimistic. The Philippines aspires to be one of six ASEAN countries, after launching its procedure in May. Vietnam has been a proponent of the agreement, which led to its signature in November 2020. Brunei chairs ASEAN this year and Cambodia in 2022, prompting them to speed things up. Progress of RCEP towards ratification and entry into force by Cambodia’s leadership would be a desirable end result for the country.
In Indonesia, RCEP has appeared on the legislative agenda just as the country has struggled with a devastating second wave of COVID-19 infections brought on by the Delta variant. Iman Pambagyo, Indonesia’s former lead negotiator, predicted last year that COVID-19 would be the main barrier to a speedy review of RCEP in the DPR. Despite these odds, international trade is has re-emerged and the DPR Commission is reviewing RCEP alongside the ASEAN Trade in Services Agreement (ATISA) and the Indonesia-Korea Comprehensive Economic Partnership (IK-CEPA). Ratification is in sight.
There is top-down pressure to get these agreements across the line, RCEP in particular. President Joko “Jokowi” Widodo wants to see them done. Indonesia’s presidency of the G-20 next year is fast approaching, presenting an opportunity for the country to burnish its credentials as a global leader prepared to advance an economic recovery agenda. Its own COVID-19 situation does not help, but other areas such as economic leadership are more within the Jokowi administration’s control. Promoting international trade and being seen as responsible for pushing forward a significant trade agreement such as RCEP offers a glimmer in the midst of the pandemic’s gloom.
There are practical benefits for Indonesia in getting RCEP quickly into place. It promises to help integrate Indonesia into regional value chains, attracting more investment and manufacturing jobs. It also aligns with Jokowi’s pursuit of foreign investment in infrastructure and industry. His administration is attempting to establish a domestic battery industry. Successfully incubating this emerging value chain will rely on frameworks such as RCEP, as well as the international partnerships needed to obtain the technology and resources a new industry needs.
The next steps for RCEP will now be decided through the deliberations of the DPR Commission over the coming weeks. Commission VI will review the agreement and statements by the Ministry of Commerce and other interested parties. The Commission will determine which of the two ratification routes it will take. : by presidential decree or by the passage of an enabling law in the House of Representatives.
The swiftest and most politically certain path is ratification by presidential decree. There is limited consultation and the time frame depends mostly on the president’s agenda. If Jokowi wants to prioritize RCEP, he will expedite this process. He demonstrated his ability to push through trade agreements in 2018 when he authorized the ratification of seven different agreements through presidential prerogative.
But according to Article 84 of Law No. 7/2014 on Trade, the DPR can classify a foreign agreement presented to it as having profound implications for Indonesian society as a whole. If they claim this is the case, then the deal will have to be passed through House proceedings rather than an executive order. This procedure would possibly take longer. Consultations with relevant ministries and two-tier discussions will take place before the 575-member House of Representatives can vote on the ratification bill.
While this procedure may seem arduous, it is not a dead end for industrial agreements. The DPR ratified the Indonesia-Australia Comprehensive Economic Partnership (IA-CEPA) in 2020. Due to the slow machinations of the DPR (not the most productive legislature), the president’s coalition of political parties controls up to 80 percent of the DPR’s seats. Even in this case, Jokowi exerts a great deal of influence over the procedure and can exert the necessary pressure to secure approval. of the RCEP enabling law.
The RCEP is about to be ratified either way. With this deadline, it is conceivable to achieve Minister Lutfi’s ratification target of January 2022. As ASEAN’s largest economy, Indonesia’s early ratification will improve customers for access to RCEP, which will come into force in 2022. of the G20 presidency, this would move Indonesia forward. Position itself as an Indo-Pacific partner capable of promoting concrete economic results.
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On August 25, Indonesian Trade Minister Muhammad Lutfi defended reducing the space of the Indonesian Legislative Assembly (RPD) to ratify the Regional Comprehensive Economic Partnership (RCEP) industrial agreement. In his speech to the DPR Commission VI, which is guilty of legislative oversight of industrial agreements, Lutfi argued that the RCEP would gain advantages for Indonesia, promising to strengthen its role in regional source chains and improve its economic functionality in amid the COVID-19 pandemic.
For the RCEP to come into force, at least six ASEAN countries and three partner countries will have to ratify the agreement through their respective national processes. Singapore and Thailand have already ratified it, as have China and Japan, but Australia, New Zealand and South Korea want to ratify it to achieve their goal.
Counting ASEAN is more complex, but there is reason for optimism. The Philippines aspires to join the six ASEAN countries, after starting its process in May. Vietnam was a proponent of the agreement, leading to its signing in November 2020. Brunei chairs ASEAN this year and Cambodia in 2022, giving them an incentive to speed things up. Moving RCEP towards ratification and entry into force under Cambodia’s leadership would be a desirable end result for the country.
In Indonesia, RCEP appeared on the legislative calendar just as the country was grappling with a devastating wave of COVID-19 infections driven by the Delta variant. Iman Pambagyo, Indonesia’s former chief negotiator, predicted last year that COVID-19 would be the main impediment to a rapid revision of the RCEP in the DPR. Despite these impediments, foreign industry has re-emerged, and the DPR Commission is recently reviewing the RCEP along with the ASEAN Agreement on Trade in Services (ATISA) and the Indonesia-Korea Agreement. Comprehensive Economic Partnership (IK-CEPA). Ratification is in sight.
There is top-down pressure to push those deals, especially RCEP, forward. President Joko “Jokowi” Widodo needs this done. Indonesia’s presidency of the G20 next year is fast approaching, offering the country a chance to burnish its reputation as a world leader. in a position to advance an economic recovery agenda. His own COVID-19 scenario is not helping, however, other spaces, such as economic leadership, are more under the control of the Jokowi administration. Promoting foreign industry and being held guilty for selling a vital industry deal like RCEP offers a glimmer of hope amid pandemic pessimism.
The immediate implementation of RCEP has practical benefits for Indonesia. It promises to help integrate Indonesia into regional price chains, attracting more investment and jobs in the productive sector. It is also in line with Jokowi’s pursuit of foreign investment in infrastructure and industry. His administration seeks to create a national battery industry. The successful incubation of this emerging price chain will depend on frameworks such as the RCEP, as well as the foreign partnerships needed to secure the generation and resources needed by a new industry.
The next steps for RCEP will now be decided through the deliberations of the DPR Commission over the coming weeks. Commission VI will review the agreement and statements by the Ministry of Commerce and other interested parties. The Commission will determine which of the two ratification routes it will take. : by presidential decree or by the passage of an enabling law in the House of Representatives.
The swiftest and most politically certain path is ratification by presidential decree. There is limited consultation and the time frame depends mostly on the president’s agenda. If Jokowi wants to prioritize RCEP, he will expedite this process. He demonstrated his ability to push through trade agreements in 2018 when he authorized the ratification of seven different agreements through presidential prerogative.
But according to Article 84 of Law No. 7/2014 on Trade, the DPR can classify a foreign agreement presented to it as having profound implications for Indonesian society as a whole. If they claim this is the case, then the deal will have to be passed through House proceedings rather than an executive order. This procedure would possibly take longer. Consultations with the relevant ministries and two degrees of discussions will be necessary before the 575-member House of Representatives can vote on the ratification bill.
Despite how arduous this process appears, it is not a dead-end for trade agreements. The DPR ratified the Indonesia-Australia Comprehensive Economic Partnership (IA-CEPA) in 2020. While there is still a chance that RCEP’s enabling legislation could get stuck in the DPR’s slow machinations – it is not the most productive legislature – the president’s political party coalition controls no less than 80 percent of the DPR’s seats. Even here, Jokowi wields considerable influence over the process and can exert the right amount of pressure to ensure that RCEP’s enabling legislation passes.
The RCEP is about to be ratified either way. With this deadline, it is conceivable to achieve Minister Lutfi’s ratification target of January 2022. As ASEAN’s largest economy, Indonesia’s early ratification will improve customers for access to RCEP, which will come into force in 2022. of the G20 presidency, this would move Indonesia forward. Position itself as an Indo-Pacific partner capable of promoting concrete economic results.
On August 25, Indonesia’s Minister of Commerce, Muhammad Lutfi, defended the shrinking of the Indonesian Legislative Assembly’s (DPR) space to ratify the Regional Comprehensive Economic Partnership (RCEP) industrial agreement. In his speech to the DPR’s Commission VI, which is guilty of legislative oversight of industrial agreements, Lutfi argued that RCEP would gain advantages for Indonesia, promising to strengthen its role in regional origin chains and improve its economic functionality amid the COVID-19 pandemic.
For RCEP to enter into force, at least six ASEAN countries and three partner countries will have to ratify the agreement through their respective national processes. Singapore and Thailand have already ratified it, as have China and Japan, and Australia, New Zealand and South Korea. they want to ratify it in order to achieve their goal.
Kyle Springer is a policy fellow at the University of Western Australia’s Perth USAsia Centre.