Indonesia-EU trade relations


Indonesia is proving that it has what it takes to play a key role in the post-pandemic economic recovery and that it is ready to work with Europe in key areas for the country’s development.

Strengthening the partnership between Europe and Indonesia to better seize all the opportunities of the global economic recovery; this is the focus of the two-day 'Indonesia-Europe Business Forum 2022 ‘Enhancing Partnership for Stronger Economic Recovery', which took place on March 1st and 2st. Senior representatives from the business and political communities attended the online event, with the aim of presenting the potential for partnership between Indonesia and Europe with a particular focus on the following areas: exploring a potential collaboration in the global health architecture and the pharmaceutical industry; promoting trade and investment in renewable energy; and strengthening global trade and supply chain resilience.

The Forum was opened by the Minister of Foreign Affairs of the Republic of Indonesia, H.E Retno L.P. Marsudi. To begin with, the Minister took a position on the war in Ukraine, stating that "the Russian invasion violates international law and respect for the sovereignty and territorial integrity of each State”. The Indonesian diplomat hopes for a peaceful resolution of the conflict, despite the negative economic impact of this crisis. In terms of economic recovery, efforts are moving in the right direction in both Indonesia and Europe. Indonesia has 53 per cent of its population vaccinated and the partnership with Europe has helped Jakarta's economy a lot, today the European Union is Indonesia's fifth largest trading partner. In addition, Jakarta aims to become an increasingly important regional hub in the manufacturing and digital sectors.

The partnership with Europe must therefore develop on three main levels: the health level, helping Indonesia to succeed globally; the technology and digital economy, where Jakarta has already registered eight unicorns, estimated to reach 150 billion in 2025; and finally, the environmental level, driving the sustainable energy transition to achieve zero emissions by 2060. 

Then, the Indonesian Minister for the Coordination of Economic Affairs also stressed Jakarta's willingness to strengthen its engagement with Europe through bilateral and multilateral forums. Moreover, the growth figures for 2022 look encouraging: the Indonesian government expects a 4-5% increase and that, of the total 31.3 billion foreign direct investments, 2.4 billion will come from European countries. In addition, reforms are planned to accelerate investment in the new capital Nusantara.

Among the Italian representatives, Barbara Beltrame Giacomello, Confindustria's Vice-President for Internationalisation, stressed the importance of this meeting to make the most of the economic opportunities between the two countries. "Indonesia is a key trade partner for Italy, before the health emergency the investment flow between Italy and Indonesia was €3.1 billion and in the first ten months of 2021 the trade recovery was +21.5% compared to the decline in 2020." The Vice-President further reaffirmed, "These are encouraging numbers but there is further potential to strengthen cooperation, especially in high-value goods. In addition, to increase economic relations we need to focus on investments in advanced 4.0 technologies, which are key steps, especially for the growth and development of Small and Medium Enterprises. Europe and Indonesia are working hard to implement reform packages to increase productivity and modernisation. 

As for Italy, the industrial system has implemented reforms thanks to the PNRR and this is the time to support companies in internationalisation, with the aim of creating smart production for the ecosystem with a view to cooperation at international level. Finally, the Vice-President said that "the future of our relationship with Indonesia depends on how we match our weaknesses and strengths: if we succeed, our economy will play a major role in future growth at European level. This event is a great start to explore new approaches to working together, sharing expertise for sustainable, long-term growth."

In conclusion, the outcome of the two days of meetings can be considered more than positive. The Forum served as a platform for fruitful discussions between policymakers, business leaders and other stakeholders. Indonesia and Europe, in line with the main objective of this year's G20, showed their readiness to engage in new partnerships to achieve a stable and sustainable post-pandemic global recovery. 

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