Irvan Tisnabudi
Indonesia signed a trade agreement with Somalia on Monday in a bid to boost its ailing textiles industry and help kick-start economic development in the war-torn East African nation.
Somalia is one of Indonesia’s smallest trading partners and commerce between the two nations slumped last year to a mere $3.1 million, from $8 million in 2008, due to the global slowdown.
“This year, we can rebound back to the level of $ 8 million, as the direct trading will contribute to this,” Trade Minister Mari Elka Pangestu said at the signing ceremony in Jakarta.
In the past, most trade with Somalia has been routed via Dubai because of security concerns related to the ongoing civil war in Somalia and rampant piracy in its coastal waters.
The new agreement, which will focus on textiles and construction, will facilitate direct trade between Indonesia and Somalia, cutting costs for exporters and making it easier for Indonesia to penetrate other East African markets, Mari said.
“We will import raw materials for our textile industry, such as cotton, from Somalia with a zero percent tariff rate, which then will be used to produce finished products here that will be exported back at a zero percent tariff rate to Somalia,” she said.
Mohamud Olow Barrow, the Somali ambassador to Indonesia, said there was high demand for Indonesian-made textile products in his homeland.
“Even though Somalia’s population is only 9.8 million, the total number of Indonesian sarongs being exported to Somalia through Dubai is 20 million pieces per year,” Barrow said.
Abdirashid Mohamed Abdi, the Somali trade minister, said his country would look to Indonesian construction companies to help it reconstruct buildings that have been destroyed during the long years of internal conflict and political instability.
“With many of our construction experts working abroad due to the instabilities that our country has been experiencing, we will require support from Indonesia, which is why for construction materials that Indonesian exports will be given a zero percent tariff rate,” Abdi said.
Juniman, an economist at PT Bank Internasional Indonesia, praised the government for its efforts to penetrate East Africa, where trade has been blighted by numerous local conflicts.
“Because of this reason, most of our trade in those [conflict] countries has been done through Dubai first, because the markets are difficult to penetrate,” Juniman said.
This results in slightly higher costs for exporters because they have to retain the services of a trade broker, he explained.
However, Juniman warned that direct trade would bring additional risks for exporters.
“Countries like Somalia possess a threat for our exporters because of their safety issues, especially if goods are sent by sea, with their pirates. There are always risks involved when exporting to countries of this nature and I hope both governments will prevent them,” he said.
Source: Jakarta Globe.
Link: http://thejakartaglobe.com/business/trade-deal-with-somalia-to-help-rebuild-clothe-ailing-nation/353437.
Indonesia signed a trade agreement with Somalia on Monday in a bid to boost its ailing textiles industry and help kick-start economic development in the war-torn East African nation.
Somalia is one of Indonesia’s smallest trading partners and commerce between the two nations slumped last year to a mere $3.1 million, from $8 million in 2008, due to the global slowdown.
“This year, we can rebound back to the level of $ 8 million, as the direct trading will contribute to this,” Trade Minister Mari Elka Pangestu said at the signing ceremony in Jakarta.
In the past, most trade with Somalia has been routed via Dubai because of security concerns related to the ongoing civil war in Somalia and rampant piracy in its coastal waters.
The new agreement, which will focus on textiles and construction, will facilitate direct trade between Indonesia and Somalia, cutting costs for exporters and making it easier for Indonesia to penetrate other East African markets, Mari said.
“We will import raw materials for our textile industry, such as cotton, from Somalia with a zero percent tariff rate, which then will be used to produce finished products here that will be exported back at a zero percent tariff rate to Somalia,” she said.
Mohamud Olow Barrow, the Somali ambassador to Indonesia, said there was high demand for Indonesian-made textile products in his homeland.
“Even though Somalia’s population is only 9.8 million, the total number of Indonesian sarongs being exported to Somalia through Dubai is 20 million pieces per year,” Barrow said.
Abdirashid Mohamed Abdi, the Somali trade minister, said his country would look to Indonesian construction companies to help it reconstruct buildings that have been destroyed during the long years of internal conflict and political instability.
“With many of our construction experts working abroad due to the instabilities that our country has been experiencing, we will require support from Indonesia, which is why for construction materials that Indonesian exports will be given a zero percent tariff rate,” Abdi said.
Juniman, an economist at PT Bank Internasional Indonesia, praised the government for its efforts to penetrate East Africa, where trade has been blighted by numerous local conflicts.
“Because of this reason, most of our trade in those [conflict] countries has been done through Dubai first, because the markets are difficult to penetrate,” Juniman said.
This results in slightly higher costs for exporters because they have to retain the services of a trade broker, he explained.
However, Juniman warned that direct trade would bring additional risks for exporters.
“Countries like Somalia possess a threat for our exporters because of their safety issues, especially if goods are sent by sea, with their pirates. There are always risks involved when exporting to countries of this nature and I hope both governments will prevent them,” he said.
Source: Jakarta Globe.
Link: http://thejakartaglobe.com/business/trade-deal-with-somalia-to-help-rebuild-clothe-ailing-nation/353437.
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