Russia, Indonesia Looking At EAEU Free Trade Cooperation Sectors
Hi-Tech, transport, IT, computing, and Infrastructure all on the free trade agenda
Russia welcomes the restart of the talks between the Eurasian Economic Union (EAEU) and Indonesia on the free trade zone creation, Russian Foreign Minister Sergey Lavrov told a news conference after the talks with his Indonesian counterpart Retno Marsudi today (July 6).
“We have confirmed the intention to further diversify trade, particularly through expansion of our cooperation on high-tech products. We noted energy, oil and gas, transport infrastructure, civil aviation, machine building, computer and telecommunications technologies, and halal industry as very promising. We welcome convening the 13th meeting of the Russian-Indonesian joint commission on trade, economic and technical cooperation as soon as possible. We support talks on the creation of a free trade zone between Indonesia and the Eurasian Economic Union.” Lavrov stated.
Indonesia is a good choice for a developing trade partner for Russia, it has a large and increasingly prosperous consumer base of 260 million, spending US$0.6 trillion in 2018, about 40% of the total ASEAN spend. Consumer confidence is also high. Recent reports here by DBS Singapore and here by Deloittes point to a booming, if disparate domestic economy.
Current Russian trade trends with Indonesia are also on an upwards path, as we can see in these statistics courtesy of Trading Economics (figures in millions of US dollars) and grew steadily during the course of 2019.
Indonesia has also been a port of call for Russian auto manufacturer Kamaz, who established a manufacturing plant in the country in 2018 and also set up a number of service centres. There are additional benefits for Russian businesses establishing manufacturing facilities in the country, Indonesia is a member of the ASEAN bloc, which also includes Brunei, Cambodia, Laos, Malaysia, Myanmar, Philippines, Singapore, Thailand & Vietnam. These countries enjoy free trade between each other, meaning subject to rules of origin regulations, production in one country can be exported, duty free, to the other. ASEAN also has Free Trade Agreements with China and India. This means, given the right circumstances, a Russian-owned manufacturing entity could export, duty free to these additional markets. We recently provided a guide to best import-export practices in Indonesia here.
It is worth noting that Russia also has a Double Tax Treaty with Indonesia, which if used correctly can reduce profits taxes for Russian entities based in Indonesia. Professional advise should be sought. In terms of exports to Indonesia, Russia currently sells a variety of products, ranging from oil and gas to fertilizers and automotive parts. A breakdown can be seen here.
It should be noted that there are Quality Control standards differences between Russia and ASEAN nations, and Russian exporters should be aware of these. We covered this in the article Quality Control Challenges For Russian Exporters To ASEAN.
Our practice, Dezan Shira & Associates, has offices in Jakarta and Batam in Indonesia and are familiar with the protocols concerning import/export and can advise on local market conditions. Please contact Maria Kotova at russia@dezshira.com for assistance both with local market intelligence and business plan development in addition to corporate establishment, tax advisory and on-going corporate compliance in Indonesia.
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During these uncertain times, we must stress that our firm does not approve of the Ukraine conflict. We do not entertain business with sanctioned Russian companies or individuals. However, we are well aware of the new emerging supply chains, can advise on strategic analysis and new logistics corridors, and may assist in non-sanctioned areas. We can help, for example, Russian companies develop operations throughout Asia, including banking advisory services, and trade compliance issues, and have done since 1992.
We also provide financial and sanctions compliance services to foreign companies wishing to access Russia. Additionally, we offer market research and advisory services to foreign exporters interested in accessing Russia as the economy looks to replace Western-sourced products. For assistance, please email russia@dezshira.com or visit www.dezshira.com
