Going Far Together with Africa
03 August 2018
Naufal Armia Arifin and Gilang Kembara The Asia-Africa Conference in 1955 and the Non-Aligned Movement in 1961 depict the history of Indonesia’s relations with the African continent. In the 1950s and 1960s, the relationship was mainly normative, focused on their similarities as newly independent countries in the context of the Cold War. Fast forward to 2006, there was a renewal of bond through the New Asian–African Strategic Partnership (NAASP), which discussed more practical issues such as environment. However, there had been no resounding efforts until April 2018 when the first Indonesia Africa Forum (IAF) was held in Bali. This marks a new momentum for Indonesia and African countries to deepen their relationship through economic and business agreements. There are three highlights of the forum. First, business deals were made, valued up to 586 million US Dollars. Second, a task force was established to map and implement infrastructure policies. Third, Preferential Trade Agreements (PTA) was signed between Indonesia and several countries including Mozambique, Tunisia, Angola, Kenya, and South Africa. Foreign Minister Retno Marsudi became the first Indonesian representative to visit Mozambique in the past 13 years. The two countries plan to improve their lackluster trade relations, with an eye for passenger train exports by PT Industri Kereta Api (INKA). As for with Tunisia, Indonesia enjoys a sound bilateral trade relation, valued at 87 million USD, that heavily benefits Indonesia through exports of animal products, fruits, and chemicals. Both countries have agreed on the first round of the PTA in June, with a focus to start trade negotiations in smaller scales. Angola and Kenya have a significantly higher trading volume with Indonesia -- the value of each country’s trade with Indonesia is approximately 300 million USD, focusing on commodities such as animal-vegetable fat, oil and gas, paper, textile, and fibers. Meanwhile, of all the African countries, South Africa retains the highest volume trade with Indonesia, reaching 1.2 billion USD in 2017 with fruits from South Africa, and coffee, tea, animal products, chemicals, and plastic from Indonesia as the main goods. All of the African countries listed above have maintained stable socio-political condition, which helps to provide an atmosphere of confident and predictability for businesses to operate. Furthermore, economic outlook reports from International Monetary Fund (IMF) and African Development Bank (AfDB) suggest that now is the right time for Indonesia to boost its trade with the aforementioned countries. For example, Angola heavily depends on export of crude oil to Indonesia. However, reduction of oil price has led to a slowing down of Angola’s GDP, exacerbating the need for Angola to diversify its economy. The government of Angola is allocating around 5.5 billion USD to finance private sectors that are highly dependent on commodities such as food production and agro industry. Another notable occasion in the IAF was the start of Indonesia and Ethiopia’s first bilateral talks. Both parties were represented by their foreign ministry officials and discussed issues such as diplomatic travel and visa. Both countries have also agreed for Ethiopian Airlines to have a direct route to Indonesia this year. Ethiopia is regarded as the country with the fastest growing economy in Africa by IMF in 2018, with a GDP growth of 8.5%, thanks to an increase in industrial activities such as infrastructure and manufacturing. The two countries have seen trade of electronics and animal-vegetable fats among the significant ones. There are short to mid-term challenges that might hinder the progress of trade between Indonesia and its African counterparts, such as high tariffs and uneven distribution of cost and benefits. South Africa has a high import tariff that ranges from 20% - 40% for furniture and garment products. While Angola, amidst its diversification attempt, is ranked in 175 from 190 countries in World Bank’s Doing Business Report 2018 due to burdensome business environment. Reducing tariff will be one of the main challenges discussed in the PTA negotiations. Moreover, despite the fact that Ethiopia is enjoying a high growth of GDP, IMF has warned that the country must be careful in managing its debt especially from China as its largest investor and trading partner. Ethiopia needs to broaden its investment portfolio to a number of sources. Thus, despite the good climate for increased trade relations, further institutional reforms in these African countries are needed for foreign investment to prosper. Indonesia should also remain committed in progressing its relations with its African counterparts.