local stakeholder consultation workshop on the ... · local stakeholder consultation workshop on...

Local Stakeholder Consultation Workshop onThe Sustainability Impact Assessment (SIA) in support of trade and investment negotiations between the EU and Indonesia


Ms. Silvia Formentini, Representative of Directorate General for Trade of the European Commission

Opening Remarks


09:30-10:15 The SIA: Methodology and Key Aspects of Analysis – Mr. Peter

van Diermen, Team Leader SIA Study Team

Preliminary Findings on the Economic Impacts of the EU-

Indonesia CEPA – Mr Paul Baker, Senior Economic Expert SIA

Study Team

10:15-11:00 Discussion and feedback

11:00-11:15 Coffee break and networking


Outline

1. Background and Introduction

2. Conceptual Framework and

Approach

3. Stakeholder Engagement

4. Timeline and Deliverables


1. Background and Introduction


Sustainability Impact Assessment (SIA) are a tool to:

• Understand the potential economic, social, human rights and environmental impacts of a Comprehensive Economic Partnership Agreement (CEPA) / Free Trade Agreement (FTA) under negotiation

• Carry out a continuous and wide-ranging consultation process providing a high degree of transparency and engagement of all relevant stakeholders

• Make recommendations to reduce potential negative impacts and enhance positive ones


Trade Relationship between the EU and Indonesia• In 2017 Indonesia was the EU’s fifth largest trade partner in ASEAN and the 29th

largest trade partner worldwide

• For Indonesia, the EU was the fourth largest trading partner

• Indonesia exports to the EU consisted of:- 17.5% fats and oils (mostly palm oil) - 9.8% electrical machinery and equipment- 8.7% footwear- 7.4% rubber and rubber products

• Indonesia's Economic Policy Packages aim to support improved trade and investment environment

Jakarta factory workers assembling cars


Context of EU-Indonesia CEPA Negotiations1. Regional FTA negotiations between the EU and ASEAN (including Indonesia) were launched in

2007 but later paused in 2009.

2. Bilateral negotiations between the EU and Indonesia were launched on 18 July 2016. The fifth

round of talks was conducted in Brussels, Belgium from 9 to 13 July 2018.

3. CEPA is intended to develop a key aspect of the overall relationship between the EU and

Indonesia and is based on the 2014 Partnership and Cooperation Agreement (PCA).

4. CEPA aims to facilitate trade and investments and covers a broad range of issues, including

tariffs, non-tariff barriers to trade, trade in services and investment, trade aspects of public

procurement, competition rules, intellectual property rights as well as sustainable

development.


2. Conceptual Framework and Approach


SIA Methodology

Objective:Assess how the trade and trade-related provisions under negotiation could impact economic, social, human rights and environmental issues in each partner country


Quantitative approach

❑ Use of multi-region Computable General Equilibrium (CGE) model

❑ Results of model will also serve as inputs for social, human rights and environmental impact assessments

❑ CGE indicators to be explored include: welfare, GDP, trade flows (imports and outputs), sectoral output, consumer prices, wages, sectoral employment, reallocation of jobs, and CO2

Economic Impact Assessment

Qualitative approach

❑ Review of tariff and non-tariff barriers, including SPS, technical regulations, local content requirements, export restrictions, customs procedures, etc.

❑ Additionally, a review of restrictions in the trade of services, investment barriers, barriers to access to government procurement, competition policy, etc., will be undertaken.

❑ “SME Test” - Assessment of the potential impact on SMEs, including competitiveness, compliance costs, administrative costs, and market entry costs.


Social Impact Assessment

Assessment includes:

❑ Quantitatively assessing social impacts will be primarily derived from CGE model.

❑ A estimate of wages and labour costs (skilled and unskilled labour), anticipated reallocation of jobs and labour demand across economic sectors.

❑ A estimate of impact on job creation and for specific sectors, as well as on professions and skill levels.

❑ Due to anticipated adjustment costs, significant emphasis will be placed on descriptive statistics of social indicators, including: female employment, youth unemployment, wage, social protection rating, social inclusion rating, poverty rate, civil liberties index, inequality rate, education, health, and implementation of ILO Core Labour Standards

Comprehensive screening and scoping exercise highlighting:

❑ The relevant social issues in Indonesia, and to a lesser extent, in the EU

❑ Components of CEPA that may enhance or exacerbate identified issues

❑ Groups that are most likely to be impacted by CEPA


Human Rights Impact Assessment

Comprehensive screening and scoping seeks to:

❑ Identify the CEPA provisions that are most likely to impact human rights;

❑ Identify the groups that are most likely to be impacted;

❑ Identify regions and sectors most impacted by these issues; and

❑ Identify the components of a potential agreement that are likely to produce the greatest positive and negative impact.

Assessment includes:

❑ Greater focus on Indonesia than the EU, since it is anticipated that adjustment costs will be greater in Indonesia.

❑ Focus on descriptive statistics of human rights indicators, including: the right to adequate standard of living; right to the best standards of physical and mental health; the right to education; equal rights for men and women, etc.

❑ Emphasis on implementation of international human rights frameworks.

❑ Quantification of human rights impact is often difficult. Primary analysis will be qualitative in nature, aided by results from econometric modelling, detailed sectoral analyses, and information derived from stakeholder consultation activities.


Environmental Impact Assessment

Assessment Includes:

❑ CGE model providing the primary basis for quantitatively assessing environmental impacts

❑ Estimates on expected changes in carbon emissions resulting from CEPA

❑ Significant emphasis placed on the descriptive statistics of environmental indicators – GHG emissions, air quality, energy use, water quality and resources, land use, waste and waste management, biodiversity and forest area coverage

Comprehensive screening and scoping exercise will seek to:

❑ Identify key environmental issues that are relevant to sustainability in both CEPA partner countries

❑ Identify regions and sectors most impacted

❑ Identify the components of a potential agreement that are likely to produce the greatest positive and negative impact


Sector Selection

• Economic, Social, Human Rights and Environmental Impacts will be studied for sector-wide impacts.

• In addition six sectors will be studied in more detail:

1. Vegetable oils

2. Fisheries

3. Energy and mining

4. Banking and insurance

5. Automotive (vehicles and components)

6. Footwear, articles of apparel and clothing accessories


3. Stakeholder Engagement


Tools for Engagement Include:

1. Dedicated website for the SIA

2. Electronic outreach (Twitter, LinkedIn, Facebook)

3. Questionnaires

4. Local stakeholder workshop

5. Interviews and meetings with relevant stakeholders

6. Civil society dialogue


Dedicated website for the SIA Includes:

1. Publication of reports (draft and final versions)

2. Questionnaire for online stakeholder consultation

3. Stakeholder input (permission based)

4. Information on Jakarta workshop and Civil Society Dialogues

5. Dedicated email address for the SIA ([email protected])

www.eu-indonesia-sia.com

http://www.eu-indonesia-sia.com/


Questionnaires – three surveys:

1. Indonesia General Survey

2. Indonesia Consumer Survey

3. Indonesia SME Survey

Available in English and Bahasa Indonesia; English hard-copy versions present during the workshop

Collect qualitative and quantitative data


4. Time Line and Deliverables


✓ Development of methodology

✓ Review of existing studies and research

✓ Screening and scoping exercise

✓ Development of design and content for

website and social media channels

✓ Publication of the Final Inception Report

Inception Phase Completed


Implementation Phase

❑ Impact assessments: economic, social, human rights and environmental

❑ Sectoral analyses

❑ Stakeholder engagement: local workshops, interviews and meetings


Finalisation Phase

❑ Capturing final feedback from EC and Stakeholders

❑ Identification of risks and opportunities, as well as mitigation strategies

❑ Formulating answers to research questions

❑ Development of policy recommendations


Preliminary Findings on the Economic Impacts of the EU-Indonesia CEPA

Mr Paul Baker, Senior Economic Expert SIA Study TeamShangri-La Hotel, Jakarta, 10 August 2018

Economic Impact AssessmentQuantitative Approach

▪ CGE model run by Chief-Economist and Trade Analysis Unit (G2) of DG Trade

▪ Use of multi-region CGE model databased based on MIRAGE-GTAP framework.

▪ Modelling undertaken by DG Trade; with interpretation, analysis and recommendations undertaken by Study Team.

▪ GTAP 9 with 140 countries/regions and 57 sectors

▪ Dynamic CGE model

▪ Realistically takes into account resource constraints and sectoral interlinkages

▪ Project horizon 2032 against baseline growth

▪ Model indicators explored: welfare, GDP, trade flows (imports and outputs), sectoral output, consumer prices, sectoral employment.

▪ Included are FTAs: EU-KOR, CETA, EPAs: Western Africa & SADC, EU-SGP, EU-VNM, PAK-IDN, MYS-CHL, MYS-AUS, MYS-TUR, TPP, EFTA-PHL

Economic Impact Assessment Qualitative Approach

• Review of tariff and non-tariff barriers, including SPS, technical regulations, local content requirements, export restrictions, customs procedures, etc.

• Review of restrictions in the trade of services, investment barriers, barriers to access to government procurement, competition policy, etc.

• “SME Test” - Assessment of the potential impact on SMEs, including competitiveness, compliance costs, administrative costs, and market entry costs.

• Stakeholder consultations

• ‘Conservative’ and ‘Ambitious’ scenarios developed depending upon degrees of

liberalisation.

• Scenarios applied to:

1. Tariffs

2. TRQ

3. NTBs

4. Services

Scenarios

Indonesia Macro Conditions

• Increasingly inward looking economy

• Large untapped potential in EU market

• Services trade largely untapped

Source: IMF WEO

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1980=100• Economy doubled in 14 years (Vietnam 7 years), growing around 6 percent a year

• Adjustment costs are lower with high growth

• Domestic driven growth has been witnessed

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CURRENT ACCOUNT

% OF GDP • Current account deficit large but stable

• Partnership Agreements often present opportunities for CA financing, though can also exacerbate the deficit

• Important to balance and note the dependence on trade for intra-industry trade and capital goods and drain on reserves

Indonesia Trade Profile

Trade to GDP (%)

• Increasingly inward looking economy

• Large untapped potential in EU market

• Services trade largely untapped

Source: World Bank; ITC

Indonesia’s - level of Processing

Note: 2016 data; Source: ITC Competitiveness Map

Industry Share Primary Intermed. Capital Consumer

00 All industries 100% 25% 51% 7% 18%

27 Mineral fuels, oils, distillation products, etc 19%

15 Animal,vegetable fats and oils, cleavage products, etc 13%

85 Electrical, electronic equipment 6%

71 Pearls, precious stones, metals, coins, etc 4%

87 Vehicles other than railway, tramway 4%

40 Rubber and articles thereof 4%

84 Boilers, machinery; nuclear reactors, etc 4%

64 Footwear, gaiters and the like, parts thereof 3%

62 Articles of apparel, accessories, not knit or crochet 3%

44 Wood and articles of wood, wood charcoal 3%

26 Ores, slag and ash 2%

48 Paper & paperboard, articles of pulp, paper and board 2%

61 Articles of apparel, accessories, knit or crochet 2%

38 Miscellaneous chemical products 2%

03 Fish, crustaceans, molluscs, aquatic invertebrates nes 2%

29 Organic chemicals 2%

39 Plastics and articles thereof 2%

55 Manmade staple fibres 1%

09 Coffee, tea, mate and spices 1%

72 Iron and steel 1%

• High levels of participation in GVCs

• Low levels of final goods (TCA sector)

Indonesia’s - level of trade in foreign value added

Note: OECD Stats, accessed Aug 2018

• Foreign inputs in exports is quite high particularly for more sophisticated higher value added goods

• Agri-business exports has low levels of import dependence

• Services have low levels of foreign inputs

Industry 1995 2000 2005 2008 2009 2010 2011 Trend

Ag, forest, fish

4.89 5.22 6.65 5.95 4.35 4.77 5.53

Mining

4.47 6.55 6.82 6.33 4.57 4.12 4.88

Agri-business

8.48 10.06 10.57 9.4 6.98 7.98 8.68

Textiles, clothing, apparel, leather

17.12 21.85 19.3 19.21 14.76 16.08 18.25

Wood and products of wood and

cork 11.1 13.41 14.64 12.56 9.47 10.24 11.9

Pulp, paper, paper products,

printing and publishing 18.4 27.3 23.71 22.46 16.82 18.57 20.52

Refined petroleum products and

nuclear fuel 13.59 15.39 15.86 14.73 10.21 8.76 10.74

Chemicals and chemical products

29.29 28.33 26.16 23.88 16.84 15.92 19.78

Rubber and plastics products

21.57 28.98 21.35 20.71 15.73 16.84 19.62

Other non-metallic mineral

products 15.37 20.37 19.27 17.42 12.56 12.6 14.68

Basic metals and met. products

25.47 33.21 30.86 31.43 20.97 19.93 23.75

Machinery and equipment, nec

39.84 43.26 41.36 40.33 34.61 35.37 37.97

Electrical and optical equipment

34.09 28.63 26.98 28.84 22.84 24.54 26.66

Electrical machinery and

apparatus, nec 30.87 31.21 28.22 27.35 21.26 23.05 25.77

Transport equipment

26.82 27.46 24.71 27.64 21.74 22.82 24.09

Manufacturing nec; recycling

25.69 19.31 20.89 17.18 14.62 14.76 17.26

Total Services

6.6 11.72 11.71 9.94 8.17 8.68 9.02

Total Business Sector Services

6.58 11.79 11.46 9.61 7.91 8.43 8.77

Wholesale, retail, hotels,

restaurants, transport 6.61 12.07 11.6 9.69 7.9 8.45 8.8

Finance, Real Estate and business

services 6.35 6.15 9.35 8.3 7.98 8.08 8.29

Indonesia’s – Export Structures and Product Space

Note: MIT Media Lab

• High levels of concentration of product clusters

• Variable performance (2012-16)

• Low levels of economic complexity

• Product space limited

Indonesia Tax Revenues

• Taxes peaked in 2012 ($ terms); Trade taxes represent 2.6% of total taxes in 2015

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US$ Billions IndonesiaTaxes

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Import Duties Taxes on Exports Source: OECD Statsonline accessed August 2018

• Declining value of trade for tax revenue

Source: OECD Stats accessed Aug 2018

Preliminary Macro-economic Impacts

• Significant increase in GDP for Indonesia

• Ambitious Scenario delivers bigger results

• Welfare impact estimated at $4 billion for Indonesia

6.37.2

3.44.3

Scenario I: Conservative Scenario II: Ambitious

GDP Growth (US$ Billions)

Indonesia EU

0.40%0.45%

0.01% 0.02%

Scenario I: Conservative Scenario II: Ambitious

GDP % (Growth over baseline)

Indonesia EU

Source: DG Trade Calculations

Preliminary Findings: Trade in Goods

• Positive trade balance

• Trend has been stagnant over decade

• Cyclical relationship

• Services exports, about 1/8 of goods

• Services imports, about 1/3 of goods

Source: Eurostat; ECB

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2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

INDONESIA TRADE WITH THE EU($ Millions)

Exports Imports Balance

Preliminary Findings: External Trade Accounts

• Trade has been declining. CEPA would boost exports of both parties

• Modest Scenario leads to reduction in trade balance

• Ambitious scenario boosts exports of both parties by more

• Positive trade balance is eliminated

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Trade in Goods and Services ($ Millions)


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2014 2015 2016 FTA:II

Trade in Goods and Services ($ Millions)


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Preliminary Sector Wide Impacts

0% 20% 40% 60% 80% 100%

Rice

Other Agricultural Products

Vegetables, fruit, nuts

Vegetable Oils and Oilseeds

Sugar

Red Meat

Other animal products

Milk & Dairy

Forestry & Wood products

Fishing

Fossile Fuels

Other minerals

Processed Food

Beverages and tobacco

Textiles

Wearing apparel

Leather and products

Paper

Chemical, rubber, plastic products

Metal products

Motor vehicles and parts

Other transport equipment

Electronics

Other machinery

Other manufacturing

Utilities: Energy

Other Utilit ies

Other Services

Other transport

Water transport

Financial services

Other business services

Percent Chg over baseline

Ambitious Modest

• Textiles, Clothing and Apparel experience phenomenal growth

• Some high value manufacturers growth by double digits

• Potential for growth of currently low exported products (removal of TRQs by EU)

0 1,000 2,000 3,000 4,000

Rice




Sugar

Red Meat


Milk & Dairy


Fishing

Fossile Fuels

Other minerals

Processed Food


Textiles

Wearing apparel


Paper


Metal products



Electronics

Other machinery

Other manufacturing

Utili ties: Energy

Other Utilit ies

Other Services

Other transport

Water transport

Financial services


US$ Millions Chg over baseline

Ambitious Modest


Preliminary Output Impacts

• Large increases in output

• Some contraction from other sectors due to resource constraints

• Some services experience slight contraction

-5.0% 0.0% 5.0% 10.0% 15.0%

Rice




Sugar

Red Meat


Milk & Dairy


Fishing

Fossile Fuels

Other minerals

Processed Food


Textiles

Wearing apparel


Paper


Metal products



Electronics

Other machinery

Other manufacturing

Utilities: Energy

Other Utilit ies

Other Services

Other transport

Water transport

Financial services


Output Chg over baseline %

Ambitious Modest

-500 500 1,500 2,500 3,500 4,500

Rice




Sugar

Red Meat


Milk & Dairy


Fishing

Fossile Fuels

Other minerals

Processed Food


Textiles

Wearing apparel


Paper


Metal products



Electronics

Other machinery

Other manufacturing

Utilities: Energy

Other Utilit ies

Other Services

Other transport

Water transport

Financial services


Output Chg over baseline $ millions

Ambitious Modest


Sector Focus in SIA for EU-Indonesia CEPAConsideration of Economic Impacts

Sector Economic and Trade Impact Sectoral Sensitive Issues Offensive/

Defensive interestsVegetable

oils

Indonesia is the largest producer of palm oil in the

world with approx. 35 million tonnes per year,

representing around 55% of global production. The

EU market represents about 15% of total

Indonesian palm oil exports.

About 40% of palm oil is

produced by smallholders in

Indonesia. EU biofuel

regulatory regime

EU and Indonesia both have offensive and

defensive interests related to increasing

exports/imports, initiatives on

sustainability issues and domestic lobby

groups.

Automotive Indonesia largest automotive market in ASEAN and

2nd largest manufacturer.

EU export and outward FDI opportunities

For EU, issues of Export

Quality Infrastructure (EQI)

constraints remain.

EU and Indonesia have offensive interests.

Significant trade compatibility exists.

Energy and

mining

Indonesia has major deposits of oil, natural gas,

coal and other minerals.

Restrictions in the form of foreign equity caps,

prohibitions on investment, forced divesture,

export restrictions on unprocessed mineral ores,

and legal uncertainty and inconsistency a

hindrance to EU investment.

Policy space for Indonesians

to promote downstream

mining industry through

export restrictions and

majority ownership for

domestic firms

Indonesia has defensive interests; EU

offensive interests related to investment in

Indonesia

Sector Focus in SIA for EU-Indonesia CEPAConsideration of Economic Impacts

Sector Economic and Trade Impact Sectoral Sensitive

Issues

Offensive/

Defensive interestsFisheries industry Indonesia a major exporter of fisheries

products; EU largest importer. Opportunity

for Indonesia to expand exports and move to

higher value added downstream.

Indonesia’s SME

development. Sensitivity also

around meeting EU SPS

standards. The EU canning

industry is located in regions

very dependent of fishing and

processing.

Mainly offensive issues for EU and

Indonesia. Also some defensive sectors for

the EU.

Footwear and

Articles of apparel

and clothing

accessories.(HS 61, 62, 64)

Footwear and Articles of apparel together

account for 12.3% of Indonesia’s exports to

the EU and have potential to grow.

Large employer of urban

factory workers.

Indonesia has offensive interest,

particularly in gaining preferential access

to the EU so as to improve

competitiveness with Vietnam. EU

defensive interest in preventing flooding

the market.Banking and

insurance

Significant restrictions in financial services in

Indonesia remain that affect FDI and EU

market access

Ownership restrictions Indonesia has defensive interest in

maintaining restrictions while EU has

offensive interest in market access.

A Few Comments on the Preliminary Results

• Goods• Major results for sectors of high employment• Trade balance may deteriorate initially• NTBs have a major impact on trade flows• Limits to growth are limits of the resource endowments• Careful consideration of ROO needed• Implementation of other Partnership Agreements may alter the results• Improved trade environment should improve GVC participation• Employment of skilled and unskilled increases significantly

• Services• Service sector expansion limited but still positive• Deficit widens with EU (possibly improving Indonesian productivity)• Services have major positive economy wide productivity and investment impacts

Limitations

• Assumptions and elasticities of the model drive the results

• Economic structures are from 2011, while trade data is 2017

• Underestimation of benefits for the agricultural sector and its sub-

sectors

• Neoclassical closure: Employment is taken as given. Sensible, as we

assume a long-run perspective (2032); the disadvantage is that no

statement about the effect on short to medium term unemployment

is possible.

• No Modelling of IPR (incl. GIs)

• No Modelling of FDI


Discussion and Feedback


Preliminary Findings of the Environmental, Social and Human Rights Impacts of the EU-Indonesia CEPAMr Paul Baker, Senior Economic Expert SIA Study TeamShangri-La Hotel, Jakarta, 10 August 2018

Discussant: Mr. Paksi Walandouw, University of Indonesia

Social Impact Assessment

❑ Overview

▪ CGE Model explored: welfare, sectoral output, consumer prices, wages, sectoral employment, reallocation of jobs.

▪ Estimates on wages and labour costs (skilled and unskilled labour), anticipated reallocation of jobs and labour demand across economic sectors.

▪ Estimate impact on job creation and for specific sectors, as well as on professions and skill levels.

▪ Due to anticipated adjustment costs, significant emphasis will be placed on Indonesia for the descriptive statistics of social indicators – employment, female employment, youth unemployment, wage, social protection rating, social inclusion rating, poverty rate, civil liberties index, inequality rate, education, health, and implementation of ILO Core Labour Standards.

❑Comprehensive screening and scoping exercise that highlights: ▪ The relevant social issues in the Indonesia, and to a lesser extent, in the EU;

▪ The components of CEPA that may enhance or exacerbate these issues; and

▪ The particular groups that are most likely to be impacted by CEPA.

45REVISED-TRADE2016/C2/C06

Preliminary Findings: Employment Impacts

• Large employment gains in leather products, apparel and textiles

• Some losses from other sectors as expanding sectors absorb labour

• Services experience slight losses in employment

-10.0% -5.0% 0.0% 5.0% 10.0% 15.0% 20.0%

Rice




Sugar

Red Meat


Milk & Dairy


Fishing

Fossile Fuels

Other minerals

Processed Food


Textiles

Wearing apparel


Paper


Metal products



Electronics

Other machinery

Other manufacturing

Utilities: Energy

Other Utilit ies

Other Services

Other transport

Water transport

Financial services


Chg over baseline

Skilled Unskilled

-10.0% -5.0% 0.0% 5.0% 10.0% 15.0% 20.0%

Rice




Sugar

Red Meat


Milk & Dairy


Fishing

Fossile Fuels

Other minerals

Processed Food


Textiles

Wearing apparel


Paper


Metal products



Electronics

Other machinery

Other manufacturing

Utilities: Energy

Other Utilit ies

Other Services

Other transport

Water transport

Financial services


Chg over baseline

Skilled Unskilled


Conservative Scenario Ambitious Scenario

Preliminary Findings: Wage Impacts

• Unskilled wages increase by nearly 0.5% and skilled wages increase by 0.64% as demand for skilled labour rises

• Small increases in inequality appear through CEPA

• Need for adjustment flanking measures


Wages for unskilled Labour

%

EU 0.01%

IDN 0.48%

Wages for skilled Labour

%

EU 0.02%

IDN 0.64%

Wages for unskilled Labour

%

EU 0.02%

IDN 0.53%

Wages for skilled Labour

%

EU 0.02%

IDN 0.74%

Human Rights Impact Assessment

❑ Comprehensive screening and scoping exercise based on the EC’s Guidelines for impact assessments

that seeks to:

▪ Identify the CEPA provisions that are most likely to impact human rights;

▪ Identify the groups that are most likely to be impacted;

▪ Identify regions and sectors most impacted by these issues; and

▪ Identify the components of a potential agreement that are likely to produce the greatest positive and

negative impact.

❑ It is anticipated that adjustment costs will be greater for Indonesia than is the case for the EU.

❑ Focus on descriptive statistics of human rights indicators, including: the right to adequate standard of living;

right to the best standards of physical and mental health; the right to education; equal rights for men

and women, etc. Additionally, emphasis will be placed on implementation of international human rights

frameworks.

❑ Quantification of human rights impact are often difficult. Primary analysis will be qualitative in nature, aided by

results from econometric modelling, detailed sectoral analyses, and information derived from stakeholder

consultation activities.

Environmental Impact Assessment

❑Overview

▪ Model indicators to be explored: Sectoral output and CO2.

▪ Due to anticipated adjustment costs, significant emphasis will be placed on Indonesiafor the descriptive statistics of environmental indicators – GHG emissions, airquality, energy use, water quality and resources, land use, waste and wastemanagement, biodiversity and forest area coverage.

▪ Additional qualitative assessment will examine the potential interaction betweenCEPA and MEAs to which Indonesia and the EU are a signatory.

❑Comprehensive screening and scoping exercise that seeks to:

▪ Identify key environmental issues that are relevant to sustainability in both CEPApartner countries;

▪ Identify regions and sectors most impacted by these issues; and

▪ Identify the components of a potential agreement that are likely to produce thegreatest positive and negative impact.

49

Preliminary Findings: Environmental Impacts

• CO2 Emissions increase significantly in Indonesia as a result of economic growth, but CEPA adds another 0.22% of CO2 emissions.

• Ambitious scenario increases growth and output and also CO2 emissions

• Clothing and leather are also high polluting industries in many cases, leading to potential river and air pollutions

• Increasing need for robust environmental standards and safeguards


Cross-Cutting Issues

❑The impact of the proposed CEPA on LDCs and outermost regions, SMEs and consumers will also be investigated.

❑For all non-sector specific issues, such as public procurement, establishment/investment, labour mobility, trade facilitation, etc., a detailed characterisation is still to be undertaken for the main sectors involved.

❑The impact of CEPA on global value chains (GVCs) will also be further investigated. It is recognised that in order for GVCs to operate efficiently, CEPA provisions concerning behind-the-border policies should be carefully reviewed and disciplined (ROO, Customs and standards in particular).

51REVISED-TRADE2016/C2/C06

Sector Focus in SIA for EU-Indonesia CEPAConsideration of Social, Human Rights and Environmental Impacts

Sector Social Impact Human Rights Impact Environmental Impact

Vegetable

oils

Important source of income and

employment in rural areas and

poorer segments of society.

Potential to improve wealth

among these groups and regions

Impacts labour standards and

SMEs (small holders). Palm oil

employs workers from more

than 3.5 million Indonesian

households; land grabs and

displacement of indigenous

groups

Deforestation, leading to increases

in GHG emissions, biodiversity

loss, impacts on soil and air

quality. ‘Slash and burn’

techniques by smallholders

Auto-

motive

Growth in employment for major

jobs-producing sector in both EU

and Indonesia

Labour standards, including

subcontracting.

Increases in GHG emissions

Energy

and

mining

Mining and energy a potentially

important source of employment

for poorer communities with

limited alternative economic

opportunities and for government

revenues at the local level.

Government funds can be used to

further social policies

Unsafe labour conditions; land-

grabs and displacement of

indigenous populations;

contamination of groundwater

leading to negative health

impacts

Increase in fossil fuel production

and consumption leading to rise in

GHG emissions;

deforestation leading to increase

in GHG emissions, soil erosion and

loss of biodiversity; downstream

silting and destruction of coral

reefs

Sector Social Impact Human Rights Impact Environmental Impact

Fisheries

industry

Significant number of SMEs

involved. Major source of income

for poorer, lower-skilled workers in

Indonesia without suitable

alternative sources of income.

Potential negative impact on EU

fisheries processing industry in

coastal areas more reliant on the

sector

Labour standards and health and

safety issues in SMEs. Food

security could be improved by

sustainable management or

harmed by overfishing.

Over fishing, soil

erosion, waste

management.

Footwear and

Articles of

apparel and

clothing

accessories.(HS 61, 62, 64)

Significant source of employment in

Indonesia; important source of

employment and earnings for

women. Potential to reduce poverty

Labour standards and health and

safety issues.

Increases in air and

water pollution as a

result of the

production process

Banking and

insurance

Potential growth in well-paying jobs

in both EU and Indonesia.

Low income groups better served

with more competitive products

and wider choice.

Sector Focus in SIA for EU-Indonesia CEPAConsideration of Social, Human Rights and Environmental Impacts


Mr Paksi Walandouw

Research Manager at the Demographic Institute of the University of Indonesia

Thank you! We welcome your input!

Stay up to date on the evaluation process

[email protected]

www.eu-indonesia-sia.com

@ EU_ID_SIA

mailto:[email protected]

http://www.eu-indonesia-sia.com/


Sectorial perspectives: Concerns, progress and opportunities – Panel discussion with speakers for in-depth study of 6 selected sectors.

• Togar Sitanggang – Vice Chairman of the Indonesia Palm Oil Association

• Luthfi Mardiansyah – Board Member of KADIN

• Yose Rizal Damuri – Head of Economics Department of the Center for Strategic and International Studies

• Ade Sudradjat Usman – Country Director of the Indonesia Textiles Association

• Andi Gani Nena Wea – President of the Confederation of All Indonesian Trade Union


Review of Main Discussion Points

Mr Peter van Diermen – Team Leader SIA Study Team


Mr. Raffaele Quarto, Head of the Trade and Economic Section at the Delegation of the European Union to Indonesia

Closing Remarks

local stakeholder consultation workshop on the ... · local stakeholder consultation workshop on...

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