The Greater Bay Area maintains intensive economic relations with ASEAN, especially Indonesia
By Chen Yu
From December 2 to 4, 2022, Guangzhou hosted the 19th International Finance Forum (IFF) annual meeting, themed “The Ever-Changing World: Reshaping Our Shared Future.” The event was attended by leaders of world organizations including the United Nations, the International Monetary Fund, and the World Bank, as well as by executives from leading global financial institutions and enterprises.
Ben Perkasa Drajat, Consul General of the Republic of Indonesia in Guangzhou who attended every session of the meeting, delivered a speech at the “IFF Summit — Silk Road International Association (SRIA) Summit.”. In an interview with China Report ASEAN, he expounded on the unique advantages of the Guangdong-Hong Kong- Macao Greater Bay Area (GBA), particularly its long-term and close trade and investment ties with ASEAN countries. In the post-epidemic era, he urged businesses on both sides to further strengthen connectivity to better embrace recovery of cross-border trade and investment.
China Report ASEAN: How much business does Indonesia do with the GBA and what does the future with the GBA free trade zone look like?
Ben Perkasa Drajat: China is Indonesia’s biggest trading partner in which the two-way trade figure reached US$123 billion in 2021. China is also among its biggest investors, with a value of US$3.2 billion. Meanwhile, the trade between Indonesia and Guangdong Province alone amounted to US$23.87 billion in 2021. It represented 19 percent of total trade between Indonesia and China, first among China’s provinces and regions.
Traditionally, the GBA, especially Guangdong Province, has been the major gateway of trade between Indonesia and China. Investment cooperation between Indonesia and China, particularly around the GBA, is on a very good track. The existence of the Free Trade Zone and its favorable policies and supportive environment will further enhance the trade and business relations between the GBA and its global partners, especially Indonesia.
China Report ASEAN: What is the role of free trade zones in financial innovation?
Ben Perkasa Drajat: Many researchers have found that establishing Free Trade Zones promotes financial innovation and supports a free trade account system as well as commodity trading centers. Banks start to open free trade accounts. Many enterprises then use these free trade accounts to develop trade financing, cross-border mergers and acquisitions, and cross-border trading settlements, among other activities. The free trade account system helps to build a channel between free trade zones and overseas and offshore markets. All of those steps greatly facilitate local enterprises going global and the internationalization of the local currency.
China Report ASEAN: How can Guangdong, Hong Kong, and Macao better cooperate with global partners such as Indonesia and ASEAN?
Ben Perkasa Drajat: The GBA enjoys distinctive geographical advantages such as the most intensive cluster of airports and ports in the world. The area has enjoyed robust economic growth and is vibrant and bustling. Guangdong is the fastest growing province in China’s mainland, while Hong Kong and Macao are mature economies.
The GBA maintains intensive economic relations with ASEAN, particularly Indonesia. ASEAN and Indonesia enjoy positions as some of the largest trading partners of the area. A survey showed that ASEAN is the next expansion destination for companies in the GBA. Nearly 60 percent of businesses in the GBA are considering expansion into the ASEAN region in the next three years.
In my opinion, GBA enterprises must strengthen their connectivity with their global partners, especially Indonesia and ASEAN. Because when cross-border trade and investment activities rebound after the Covid-19 pandemic has eased off and border control measures have relaxed, industry players must lose no time in reconnecting with overseas business partners.
China Report ASEAN: We’ve been hearing a lot about the Regional Comprehensive Economic Partnership (RCEP). Can you talk about Indonesia’s role in it?
Ben Perkasa Drajat: The RCEP initiative was actually first proposed by Indonesia during its ASEAN chairmanship in 2011. On November 15, 2020, the RCEP was finally signed after eight years of negotiations. It is one of the largest trade deals in history, covering a third of the global economy and population. A total of 15 countries have joined so far.
The signing of the RCEP signaled to the world and businesses that countries in this region remain optimistic and are forward-looking on deepening and expanding regional economic integration to bolster our role in the global value chain.
Indonesia has played a significant role in the negotiations. As the seventh largest economy in the world—and the largest in ASEAN— it is in Indonesia’s interest to see this trade deal concluded. It is even more important given the lackluster development of multilateralism and disruption of global trade caused by the Covid-19 pandemic.
For Indonesia, the benefits of RCEP include creating opportunities for the Indonesian industry to take advantage of regional value chains, increasing high-quality telecommunication services, and triggering investment. Additional benefits of RCEP for ASEAN members will also include utilization of a Regional Value Chain that will be connected to the Global Value Chain.
To enhance the competitiveness of the national economy under the RCEP framework, Indonesia has made structural and policy adjustment through the implementation of Indonesia’s Job Creation Law. It is one of the most important policies to enable Indonesia to attract new investments.
China Report ASEAN: How does a multilateral NGO like IFF support the global agenda in sectors such as health architecture, digital transformation, and sustainable energy transition?
Ben Perkasa Drajat: As I mentioned earlier, IFF might be able to provide insights on the best ways for the international community to come together to meet and address such daunting global challenges.
For example, global health architecture, sustainable energy transition, and digital transformation were the three main pillars of the 2022 G20 summit in Indonesia. The path toward global recovery requires stronger collective cooperation that ensures equality in global health standards and closer collaboration to ensure the global community’s resilience in terms of any future pandemic.
Achieving the true potential of rapid digitalization of the global economy requires a new landscape of cooperation among nations and all stakeholders to secure common prosperity in the digital age. Restoring the post-pandemic global economic order in a way that is stronger, inclusive, and collaborative by leveraging digitalization is essential in overcoming various problems of mankind.
The impact of climate change is becoming increasingly real and beginning to affect local and global development. However, this energy transition requires a very large investment.
In my opinion, IFF could contribute by refocusing its discussion on these three pillars. Through the annual forum, the IFF should be able to provide recommendations on strengthening global health resilience and helping to build a global health system that is more inclusive, equitable, and responsive to crises. The IFF can also provide insights on how best to leverage digitalization to address various global issues. Finally, the IFF can closely monitor the situation to ensure that energy sustainability can run optimally and provide a platform for investment.