The Political Economy of Trade Policy in Indonesia

In 1997, Indonesia was hit by an economic crisis. It forced the government to turn to the IMF and to adopt an economic recovery and reform programme, including in trade. This paper focuses on Indonesia's trade policies after the economic crisis. The paper examines the policy trends towards protection and addresses the issues of competitiveness. It also discusses Indonesia's positions in the WTO and Doha Round, and analyses its policies on and involvement in free trade agreements (FTAs), which have recently proliferated in the Asia-Pacific region. The paper concludes that FTAs have become an element of Indonesia's international economic diplomacy. However, Indonesia will negotiate FTAs only with a few major trading partners, and the policy is aimed at producing high quality agreements.