Italy and Indonesia: a great potential

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The recent experience with Covid-19 has improved the political and economic dialogue between Italy and Indonesia 

The Italy-ASEAN Association organized a meeting on Indonesia and its response to the crisis caused by the Covid-19 pandemic. The meeting saw the participation of the Italian Ambassador in Indonesia, Benedetto Latteri, the Indonesian Ambassador in Italy, Esti Andayani, the Vice-President of Confindustria responsible for internationalization, Barbara Beltrame, the Indonesian Deputy Minister for Foreign Affairs responsible for European and American Affairs, Ngurah Swajaya, and finally the Vice-President of KADIN, Shinta Kamdani.

The experience of the pandemic has greatly affected Indonesia’s economy, weakening key sectors such as trade and tourism. To date, the virus has spread to all provinces across the country and the most affected areas are those of Jakarta, North Sumatra and East Java. This phenomenon led to a 5.3% contraction in GDP and a 30% reduction in trade volumes in the first half of 2020. However, this emergency has highlighted Indonesia’s increased degree of resilience in dealing with the crisis, laying the foundations for a renewed spirit of cooperation between Indonesia and Italy.

Indonesia exports a variety of products to Italy ranging from tropical fruits and vegetable oils to cosmetics, electrical machinery and componentry. The EU is Indonesia’s third largest trading partner, generating a total trade value of EUR 23.8 billion in 2019. The two countries appear to have complementary import and export needs and intend to seize the opportunities given by the new international context in order to develop successful trade strategies.

To ensure a more intense flow of investments between the two countries, the EU is also showing more flexibility towards its companies, supporting them in the economic recovery and relaunching the importance of foreign trade and internationalization. The European institutions recognize the strategic importance of ASEAN and they are enhancing international negotiations with the purpose of promoting intense cooperation, in contrast with the emergence of protectionist measures by other partners. Free trade will be the key to emerge from the crisis and will be the most effective tool to promote the economic growth of the two countries.

There are two international agreements, still being negotiated, which represent an interesting opportunity for Indonesia and the EU: the Regional Comprehensive Economic Partnership, a trade agreement including 15 Asian countries, and the Indonesia-EU Comprehensive Economic Partnership Agreement. The latter focuses on trade relations between Indonesia and the EU, and aims to ensure a more solid and productive relationship between Indonesia and European countries. The topics covered range from the removal of duties to the promotion of the flow of investments, from the protection of intellectual property to the strengthening of international cooperation. With the conclusion of these agreements, the value of trade between the two regions would increase significantly and ensure mutual benefits.

Therefore, it may be held that although the pandemic has generated significant consequences for the Italian and Indonesian economy, this experience has also opened the doors to new opportunities for the two countries. In fact, it has highlighted the mutual willingness to explore respective markets, adopting a renewed approach that, echoing the words of the Indonesian Ambassador in Italy Esti Andayani, aims to "transform pessimism into optimism".

Article written by Hania Hashim 

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