Oman has the potential to become a strong partner in trade and investment among other Middle Eastern countries, an opportunity that should be cultivated to help reduce the trade deficit, the Indonesian ambassador to Oman has said.
Ambassador Musthofa Taufik Abdul Latif told The Jakarta Post that his side was discussing stronger bilateral trade between the two countries with his Omani counterpart.
“We are trying to increase trade; we will try to create a free trade agreement [FTA] [with Oman],” he said on the sidelines of the Oman Vision 2040 national conference in Muscat in late January.
Musthofa said Indonesia had proposed to create an FTA with member countries of the Cooperation Council for the Arab States of the Gulf, originally known as the Gulf Cooperation Council (GCC).
However, he said, the plan was met with uncertainty as council members had disputes between themselves regarding the diplomatic and economic blockade of Qatar.
The blockade, which has been in place since June 2017, was enforced by Qatar’s neighbors, including Saudi Arabia and the United Arab Emirates, as it was accused of supporting terrorism, among other things.
As an alternative, Musthofa said, Indonesia would be better to nurture bilateral trade with Oman rather than relying on an FTA with all of the countries in the gulf.
“We want to make [an FTA] with Oman a template for [future FTAs] with other gulf countries,” he said. “We heard that the [Indonesian] Trade Ministry has agreed on this.”
Musthofa said he was present at Trade Expo Indonesia (TEI) 2018, an annual event held by the Trade Ministry, along with 34 Omani business delegations seeking trade and investment opportunities between the two countries.
However, the plan to create an FTA with Oman might need time to be realized. When asked for confirmation, Iman Pambagyo, director of international trade negotiations at the Trade Ministry, said his side had yet to follow up on the plan.
He said Trade Minister Enggartiasto Lukita expected his team to focus more on two “giant” negotiations: the Regional Comprehensive Economic Partnership (RCEP) and Indonesia-European Union Comprehensive Economic Partnership Agreement (IEU-CEPA).
RCEP involves 10 ASEAN member countries plus China, India, Japan, South Korea, Australia and New Zealand. Once it is agreed, RCEP will cover 48 percent of the world’s population, 38 percent of GDP and 25 percent of trade.
RCEP and the IEU-CEPA pose greater challenges compared to other negotiations, Iman said. “[They] need more focus in terms of thought and time.”
According to data from the International Trade Center’s Trade Map, the bilateral trade deficit between the two countries stood at US$27.19 million as of 2018, narrowed from a deficit of $88.96 million a year earlier.
In 2016, both countries booked a bilateral trade surplus of $140.5 million.
Indonesia’s five biggest exports to Oman last year were vehicles and spare parts, animal and vegetable oils, organic chemicals, paper and paper products as well as wood and its derivatives.
The top five imports from Oman to Indonesia, meanwhile, were iron and steel, organic chemicals, salt and other minerals, aluminum and its products as well as fish and crustaceans, Trade Map data shows.
Oman has also emerged as a foreign direct investor in Indonesia.
The latest direct investment to the country was the collaboration between state-owned energy holding company Pertamina and Oman’s Overseas Oil and Gas (OOG) last year when the two state-owned companies agreed on constructing a new refinery in Bontang, East Kalimantan, with an investment worth $10 billion.
The refinery with a capacity of 300,000 barrels per day is targeted to begin full operations in 2025.
Musthofa said Oman would provide crude oil supplies to be refined at the facility, helping Indonesia manage fuel consumption amid fluctuations in global oil prices.
“Oman can also export fuel products from Bontang and the rest can be consumed domestically. This deal benefits both countries,” he said.
Musthofa said an FTA with Oman would encompass areas beyond trade of goods, namely investment and services.
“We want a comprehensive FTA, not just a PTA [preferential tariff agreement]. So, it will include nontariff barriers,” he said.
In the services sector, he said, tourism was a potential area that could be nurtured between the two countries as more Omani tourists were interested in visiting Indonesia.
“In 2015, Indonesia received 4,000 Omani tourists. Now the number has surpassed 26,000. It’s a significant increase,” he said.
He suggested for more tourism campaigns to attract Omanis as most were unfamiliar with Indonesia.
“A lot of Omanis still think Indonesia is a low-income country because we are a major supplier of housemaids […] there are around 30,000 Indonesian housemaids in Oman, but they play a role in convincing Omanis to visit Indonesia and see our country’s potential,” he said.