Indonesia trade minister: Protectionism takes toll on APEC

Ayee Macaraig

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Indonesia trade minister: Protectionism takes toll on APEC
Indonesia's trade minister says: 'We talk about free trade but since the global financial crisis, more countries including Indonesia have been rolling out protectionist measures'

MANILA, Philippines – As a regional economic bloc, the Asia-Pacific Economic Cooperation (APEC) promises to promote free trade but its policies do not always live up to the rhetoric. 

Indonesian trade minister Thomas “Tom” Lembong told Rappler’s Maria Ressa that in past years, APEC economies have resorted to protectionist policies that hampered economic growth. 

Lembong issued the frank remarks in a wide ranging, exclusive interview at the sidelines of the APEC summit in Manila. 

“Let’s be honest. We all talk about free and even fair trade but what we do in practice, the truth is, since the global financial crisis in 2008, more countries including Indonesia have been quietly rolling out protectionist measures,” Lembong said on Monday, November 16. 

A grouping of 21 member economies, APEC aims to boost free and open trade and investment in the Pacific Rim. The bloc represents about 57% of global GDP, and 47% of world trade. (READ: APEC what? An explainer on Manila’s high-profile week)

APEC leaders including US President Barack Obama and Chinese President Xi Jinping are meeting in Manila this week for the group’s concluding meetings for 2015. Lembong is part of the Indonesian delegation, with Vice President Jusuf Kalla as head.

The trade minister said that protectionist policies caused global economic growth to weaken.

“Emerging markets, the most active in rolling out protectionist measures, have seen their currencies collapse. So yes, there are other factors like monetary policy or technological shifts, changes in economic models, costs, the economic condition in China but I do believe that protectionist policies do take their toll [on economies],” said Lembong.

Lembong said that Indonesian President Joko Widodo, known as Jokowi, is taking steps to address Jakarta’s notorious protectionist policies.

The former private equity banker said Indonesia can learn from its smaller Asian neighbors, which tend to be more outward-oriented.  

With a population of 250 million, Indonesia is Southeast Asia’s largest economy, and the fourth most populous nation in the world. 

“Even Thailand is more proactive in going out to the world, diligently searching for information, reaching out and forming partnerships. It’s oftentimes in large countries like India and Indonesia where it’s very tempting or easy to turn inward because we have a large, domestic footprint,” Lembong said. 

‘Use Chinese renminbi’ 

In APEC, Lembong said Indonesia aims to highlight Jokowi’s thrust for the global economy to make greater use of the renminbi, China’s official currency. 

The technocratic trade minister said that the shift is necessary because the world became “overly dependent” on the US dollar for trade and finances. 

“That’s a big problem at a time of shrinking dollar liquidity, when dollars are becoming scare and expensive all around the world for many reasons. I think economic leaders, political leaders have to make a concerted effort to change our habits: to make better use of the euro, the yen and I think the big one is the renminbi,” said Lembong. 

The trade official added that the greater use of the renminbi will not have significant political and security implications despite the rivalry between the US and China for global leadership.

“Look, the more the renminbi gets out into the global economy, the more stake China has in the global economy. China will take its rightful place as one of the stewards of the global economy, which is appropriate since they are the second largest economy in the world.” 

Another Indonesian priority in APEC is to support the agenda of the Philippines, the APEC host, to focus on services. Services are a key component of the Philippine economy, which relies on information technology-business process outsourcing, and overseas workers. 

“I think it’s a very forward-looking, very progressive [agenda],” said Lembong. 

“Services are underappreciated. Any progress we can make towards greater acknowledgement, greater appreciation, greater cross-border collaboration in services would be great.”

Jokowi, technology and reforms

Calling himself a gadget freak, Lembong said technology will help developing countries like Indonesia and the Philippines “leapfrog.” 

“The automation revolution is sweeping across the world. A lot of low-end services may be automated. What will always be relevant are things that require the human touch. Those are things computers, robots cannot do. We need to focus on that.”

Jokowi’s government is using technology not just to boost the economy.

Lembong said going digital helps curb corruption, a factor hindering economic growth. Indonesia ranked 107th out of 175 countries in Transparency International’s Corruption Perception Index in 2014. 

“President Jokowi, he revolutionized government services and cut corruption and moved a lot of processes from paper to online. Once things are online they are more transparent. Yes, they can be hacked but they are more likely to be caught, and audited,” he said. 

Lembong credited Jokowi for pushing for reforms despite a decline in his popularity since the ex-furniture businessman’s historic 2014 election. Jokowi is the first president to hail from outside Indonesia’s political and military elite. 

“He keeps at it, keeps at it. That’s why I think our infrastructure program is finally succeeding. In deregulation now, we’ve hit a few roadblocks. We’ve had some backlash. It’s not easy but he keeps pushing.” 

The minister said the Jokowi administration will continue pushing for reforms early on in the president’s term. Indonesian presidents can serve for two 5-year terms. 

“One thing a lot of politicians don’t realize is that the payoff to reform is amazingly fast. So one mistake perhaps leaders make is within a political term, they wait too long. If you wait until year two, year 3, year 4 it’s too late because it takes two to 3 years to see the fruits of reforms,” said Lembong. – Rappler.com 

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