In this webinar, Dr Edi Prio Pambudi discussed Indonesia’s operationalisation of the Indo-Pacific Economic Framework (IPEF) and elaborated on how the region could collaborate to ensure the success of the various initiatives within the IPEF framework. Dr Jayant Menon also shared his critical views on how participating countries could benefit from IPEF.
INDONESIA STUDIES PROGRAMME WEBINAR
Thursday, 6 April 2023 – In light of the post-COVID-19 economic recovery that coloured Indonesia’s ASEAN Chairmanship in 2023, the Indo-Pacific Economic Framework (IPEF) emerged as an upcoming new agenda for promoting economic cooperation in the region. Tapping on that, ISEAS – Yusof Ishak Institute (ISEAS) invited Dr Edi Prio Pambudi, Indonesian Chief Negotiator of IPEF and Deputy Minister for Coordination of International Cooperation of Indonesia’s Coordinating Ministry of Economic Affairs, to shed light on the current negotiation process for IPEF and its potential beneficial outcomes for ASEAN. Dr Jayant Menon, Visiting Fellow of ISEAS, also shared his views on Dr Edi’s presentation and touched upon potential issues for developing economies in ASEAN. Moderating this session was Dr Siwage Dharma Negara, Senior Fellow and Co-Coordinator of the Indonesia Studies Programme at ISEAS.
Dr Edi began his presentation by elaborating on the priorities of Indonesia’s ASEAN Chairmanship 2023. As mandated by President Joko Widodo on the “Epicentrum of Growth”, the ASEAN chairmanship had brought Indonesia to the forefront where the country had once again demonstrated its role in global leadership. For this year’s chairmanship, Indonesia focused mainly on recovery and rebuilding regional growth, digital economy, and sustainability. Dr Edi elaborated on the key deliverables, focusing on how ASEAN could achieve greater prosperity in energy security, financial inclusion, digital transformation and food security, among others. He also highlighted a key challenge for ASEAN: the contestation of power between the United States and China. These geopolitical dynamics might affect regional architecture, further jeopardising ASEAN’s neutral position. As such, ASEAN centrality is necessary for navigating the two powers’ rivalry in the region. Dr Edi was hopeful that ASEAN, including Indonesia, would be a bright spot in the current global economic slowdown.
Dr Edi further explained the details of IPEF, focusing mainly on the four pillars of IPEF; trade, supply chains, clean economy (decarbonisation, infrastructure, and clean energy), and fair economy (tax and anti-corruption). Dr Edi noted that Indo-Pacific had attracted attention in the region, as it offers tangible benefits to stimulate economic activities and investments. He also said that several elements in IPEF intersect with ASEAN values, and Indonesia have tried to accommodate as many ASEAN interests as possible in the negotiation process. Even though it was crucial to develop the network between the participating countries, Dr Edi believed it was important to establish the position of Indonesia and ASEAN in the negotiation process. This ensures alignment of ASEAN’s culture and mechanism with IPEF and other countries worldwide, ensuring a win-win situation for all stakeholders.
Dr Edi further elaborated on Indonesia’s view on the IPEF mechanism. Indonesia hopes that IPEF can lead to improvements in several sectors to ensure an efficient and competitive economy for the region, mainly in energy, connectivity, and human resource productivity. He recalled how he had engaged the private sector to share their knowledge during the second round of IPEF negotiation in Bali. This included discussions on generating profit, establishing a business framework, and creating more jobs for people. Highlighting the importance of having a clean economy in the region, Dr Edi asserted that energy security would be the priority for IPEF. The primary outcome was to build the environment for sustainable energy use. For such development, the focus would be to attract more cross-border trade and investment, as well as to enhance access to finance and technology for developing countries in the region.
Wrapping up his speech, Dr Edi reiterated Indonesia’s commitment to addressing climate change, which he felt that IPEF would be able to facilitate once the agreement is finalised. He asserted that ASEAN countries would need access to the knowledge and technology to reach their targeted climate change goals. Learning from the COVID-19 pandemic, Indonesia will continue positioning itself as a strategic and potential investment partner. With IPEF as a new regional framework to mobilise resources, Dr Edi hoped that Indonesia could play a leadership role in ASEAN in building sustainable resilience.
Agreeing with Dr Edi’s points, Dr Jayant Menon argued that establishing IPEF was a significant move despite the mixed reactions towards its initial launch. However, he highlighted some potential issues. He noted that IPEF was not a standard free trade agreement (FTA), prepping with analogies such as “all stick and no carrot.” Given that labour standards were included into the discussion of IPEF, this might bring suspicions among developing countries, as it could be an indirect way of protecting production in developed countries where minimum wages are higher. On the other hand, he acknowledged that IPEF has a concrete commitment to capacity building and technical assistance, such as re-skilling 7 million women to participate in the digital economy.
Additionally, Dr Menon also elaborated on his observations on how IPEF could assist in supporting better market access to the US. Malaysia, for instance, sees IPEF as a platform to engage with the US in seeking solutions on several trade policy measures, e.g., the withhold release orders (WROs) on six companies in the rubber gloves and palm oil industries due to allegations of forced labour. The removal of the restrictions on the export of solar products from Malaysia, Philippines and Vietnam to the US due to transhipment accusations just two weeks after IPEF was launched was another example of how IPEF could provide a platform for dealing with trade disputes and related issues within the region.
Discussing specific issues relating to energy transitions and climate change, Dr Menon emphasised the importance of the US and other developed countries in providing subsidies and helping the developing countries achieve their commitments stated in the Paris Agreement. He highlighted the disconnect between the need to raise finance for energy transition and the massive subsidies that currently go into fossil fuels. There was a need to consider reducing fuel subsidies in the context of climate financing, despite it being a politically sensitive issue. He noted that fuel subsidies aimed at keeping prices low were no longer sustainable, especially when the main beneficiaries of these subsidies were not the poor but middle income consumers and large producers. These subsidies also do not address the root cause of the current inflation problems. Furthermore, while rules are important, Dr Menon reiterated the importance of enforcement to ensure that IPEF rules get implemented as intended. Dr Menon also asserted that in terms of Sustainable Development Goals (SDGs), Indonesia’s progress towards the 2030 deadlines was still falling behind targets. COVID-19 has further hindered progress in SGDs and, in particular, the poverty targets.
Responding to Dr Menon’s discussion, Dr Edi said they would continue to engage the private sector in the negotiations, given that these corporations know how to manage the necessary business processes in the region. On market access, he ensured that IPEF would aim for market facilitation more than market access and would attempt to close this gap by incorporating the needs of ASEAN within IPEF, mainly in the form of increased capacity building and technology assistance. To conclude, Dr Menon reemphasised the importance of having all ASEAN member states be part of IPEF to make the framework more inclusive and to prioritise ASEAN’s centrality at the heart of the negotiation process.
The webinar was attended by 76 participants from the region and beyond. During the Q&A session, speakers discussed the exclusion of some ASEAN member states in IPEF negotiations; challenges in negotiating priority issues with India; clean energy, norms and mutual investment; public-private-partnerships engagement mechanism; and how Indonesia would benefit from a neutral position between the US and China. Dr Edi concluded with a hope that the discussion for IPEF would continue to be fruitful as they move to the 3rd round of negotiations in Singapore next month.
Download Dr Edi Prio Pambudi’s presentation slides here.