SPEECH/00/281
Speech by Pascal Lamy
European Commissioner for Trade
Indonesia and the European Union facing challenges together
Strategic Intelligence
Jakarta, 28 July 2000
Thank you for inviting me to speak before this distinguished audience. Some of you
may be wondering why Europe’s Trade Commissioner has come to Jakarta. Let me
tell you straight out:
 I come to Indonesia to demonstrate the EU’s support for the Indonesian
government’s reform agenda, to explore the ways and means through which the
European Union can support efforts in this country who want to build a strong
and prosperous Indonesia; and
 I come to Jakarta to invite the government to join forces with us in preparing a
new round of multilateral trade talks in the WTO framework.
You may think that the WTO agenda and Indonesia’s reform agenda are two
different ‘animals’. But they have certain things in common: they are huge
undertakings – and we believe in and are committed to doing our best to promote
both.
Let me start with my speciality, trade.
As business leaders and traders, you are well aware of the fact that the European
Union has progressively removed all trade barriers between its own members
through the creation of the Single Market, in order to stimulate economic prosperity
and wellbeing for the people of Europe. You also know how much European Union
has consistently championed the same principles on the world stage.
The multilateral trading system has been progressively liberalised over the past half
century. During that time, world trade has grown seventeen-fold and world per
capita income has doubled. The European Union believes that further liberalisation
can yield very substantial benefits and that many of these could, indeed, should go
to developing countries and regions. Economic growth is essential for Indonesia
and can be achieved through liberalisation in order to improve social conditions and
contribute to sustainable development.
It is for this reason that the European Union is one of the strongest advocates of
continuing this trend by pressing for as wide an agenda as possible in the new
round of WTO talks. Whilst we suffered a setback in Seattle in December 1999,
failing to launch negotiations, this experience only confirmed our belief for a New
Round on the basis of a broad-based agenda. We certainly believe that the next
WTO negotiations should not be limited to the narrow items of agriculture and
services, left over from the last Uruguay round. The new round must be more
comprehensive, covering both traditional topics and new issues, which will allow all
participants, and especially the developing countries, to have an interest in the
negotiations. This means the topics of most interest to Indonesia must be included.
The European Union has drawn clear lessons from the failure to open the
liberalisation talks in Seattle:
Clearly, the days are over when a handful of major trading nations negotiated deals
among themselves and then foisted them upon the rest of the world. Developing
countries in particular demand their say in the process.
The other lesson echoes what I have heard about the Indonesian domestic reform
agenda during my visit: greater transparency, efficiency and accountability. Just
like Indonesia, the WTO needs all of these.
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The WTO rulebook needs to be overhauled to respond to the challenges of today’s
trading environment. But that is not enough. Trade impacts directly on many other
issues such as the environment and the social field for example. For this reason it
is important that civil society be more closely involved so that such issues of
concern to our public opinions be taken into account.
When the new round is relaunched, the European Union believes it should cover
four main areas, if it is to be comprehensive and successful:
 It must improve market access across the board, including agriculture, services
and non-agricultural products;
 It must set rules in new areas, such as investment and competition and could do
worse than look again at its existing dispositions on, say, anti-dumping
 It needs to focus on development, by making more effective the special
treatment for developing countries;
 And it must address a number of civil society concerns, labelling and the
precautionary principle, for instance, in order to encourage greater coherence
between health and environmental protection and trade rules.
We see the WTO, with its almost universal membership and wide ranging powers to
set rules and to arbitrate, as a crucial institution for good global governance. As is
the case for any self-respecting international institution on the eve of the twenty-first
century, it must also take a good look at its own workings and reform itself to face
future challenges successfully and enjoy the trust of the world’s public opinion
I think that the Indonesian leadership can subscribe to these ideas. I assume that
we both see the globalisation process as a force that we need to harness creating
new challenges and opportunities. We, Indonesia and the European Union, share
the belief that unfettered market forces must not dictate our peoples’ way of life, our
culture and ultimately our societies and our core values.
Talking about maintaining values and culture in a changing environment brings me
to the other topic that I want to share with you:
I said that my visit has also a bilateral character. Today I had the privilege to be
received by President Wahid and to meet members of his government.
In our talks I gained some valuable insights. Indonesia has undergone fundamental
changes. The process of transition is far from over, and it takes place at a fast
pace, making it difficult to ask the right questions, not to speak of finding easy
answers.
Let me state this clearly: the government has to lead this process, and I was happy
in my talks to hear that the government is shouldering its responsibility.
Economic recovery, it seems to me, will clearly be sustained only after a minimum
of political stability has created confidence in business circles. You may see this
argument being supported by a rise in the level of the the rupiah, as it responds to a
successful transition to a democratic system.
Coming to terms with the IMF, complying with its reform agenda in a timely manner,
will certainly be of the utmost importance to signal Indonesia’s commitment to
sound economic policies and their consistent implementation, together with strong
measures on the legal side, in order to create a climate conducive for investment.
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In support of this transition, we, the Europeans, should ask ourselves how we could
help Indonesia. The EU is Indonesia’s second main trading partner, after Japan and
in front of the US, so we do have a special role to play.
At the ASEM summit in London, in 1998, the European Union made a pledge to
open its markets further. In relation to Indonesia, this commitment has produced
tangible results. Until 1997, Indonesia had traditionally run a trade deficit with the
EU. Well, today its exports to the EU outstrip ours to Indonesia by more than two to
one! Our overall trade is also on the up with Indonesia’s exports to and imports from
the EU enjoying a double digit increase in the last half year. But we can and should
do more to remove obstacles to our bilateral trade.
Foreign direct investment also has a key role to play in Indonesia’s economic
recovery. It brings much-needed capital, innovation, technology transfers and
greater efficiency for promising sectors, such as the information technology sector,
which – in my view – deserves a strong boost in Indonesia.
For a long time now, the EU has been the principal foreign investor in Indonesia.
This is a recognition by EU business of the considerable potential offered by the
Indonesian market in terms of size, labour and availability of natural resources.
This makes it is all the more essential to give the right signal to EU investors now.
This requires an improvement in the regulatory framework leading to more
transparency and more predictability in the knowledge that a failure to improve the
rule of law will have damaging consequences for investor confidence. I would also
like to stress the importance of strictly enforcing competition law and financial
regulations and of protecting intellectual property rights.
Needless to say that the EU business community is closely following the
implementation of the economic reform programme. Here, the provisions of the new
law on foreign direct investment will directly impact on the confidence of those who
are to decide to invest or not to invest.
As far as the European market is concerned, the use of the Euro, as the single
currency of European Union countries, will greatly facilitate the way for Indonesia’s
export industry to do business with the European Union. Indonesia’s exports will
become more competitive because they do not have to incur too many costs from
currency conversion.
In short, I am convinced that the development of our trade and investment
relationship has a very positive contribution to make to the economic recovery of
Indonesia. To those for whom these may sound like no more than fine words, the
facts and the figures speak for themselves.
Close links between the European Union and Indonesia are essential also in
political terms. The European Commission has suggested establishing a regular
political dialogue, and this dialogue has already started with a meeting of Foreign
minister Shihab with the 15 EU-Foreign ministers in June. Today, my colleague
Chris Patten, Commissioner for External relations, is in Bangkok at the ASEAN
Foreign Ministers’ Meeting in his company. The presence of two external relations
Commissioners in your region at this time should dispell any doubts you may have
as to the EU’s commitment to strengthening our links with Indonesia.
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All these high level contacts are vital to convey our concerns to the government and
to have its feedback. Europe is very concerned by the manifold conflicts in the
provinces. Although these conflicts have varying underlying patterns and probably
require different approaches to solve them, they all create the impression that
determined government action is required.
Let me conclude by underlining once again that the European Union sees Indonesia
as an important partner with which we want to strengthen our relations. The Union
wants Indonesia to pursue the path of reform and stands ready, willing and able to
help you along the way.
Thank you.
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