The colonial era is the genesis of the lengthy history of relations between Japan and Indonesia. Despite the sordid legacy of colonialism, the economic ties between the two nations remain strong. The endeavor to sustain amicable economic relations between the two nations was particularly evident during President SBY’s tenure, marked by the establishment of the “IJEPA” framework for collaboration. This Economic Partnership Agreement (EPA), as a component of a Free Trade Agreement (FTA), is special for its emphasis on economic cooperation in capacity building alongside trade liberalization (Dawnan, 2020). While the oil and gas sector is regarded as the central emphasis of the agreement, it also encompasses certain specialized industries, including the textile sector that incorporates Batik. This article will explore how the Indonesia-Japan FTA, IJEPA, facilitates the export of Indonesian batik textiles during COVID-19.
Economic liberalism posits that international trade is mutually advantageous, rather than solely a merciless competition for wealth and power (BBS BINUS, 2018). In employing the idea, governments attempt to create a favorable business environment by reducing trade obstacles (Indonesia, 2021), one example being their implementation of a Free Trade Agreement (FTA). Through it, governments anticipate that the FTA will significantly increase its domestic production and exports (Yusuf & Nugroho, 2022), as it capitalizes on the potential for market expansion, reduction of tariffs and non-tariff measures (NTMs), and increase of investment (Ardianti, 2015, as cited in Jessica & Kurnia, 2020). In this regard, Indonesia’s decision to join the IJEPA can be seen as a strategic economic maneuver intended to secure economic advantages from its partner.
The COVID-19 epidemic, which began in March 2020, had a detrimental influence on Indonesia’s MSMEs. According to Hernikawati (2022), the quantity of sales from Indonesian MSMEs has declined by 53.76% during the pandemic. It is noted that this is due to a reduction in people’s purchasing power and large-scale societal constraints that stifled economic migration. In such a period of crisis, hanging on to traditional face-to-face commercial conduct is a fruitless act, hence many MSMEs, including batik, have moved their operations online. Alexander (2024) claimed that a lot of batik businesses in the city of Solo have decided to maximize online sales during the COVID-19 outbreak because people are hesitant to purchase directly at marketplaces or stores. Fortunately, the use of the internet has expanded the reach of these businesses to include buyers from other countries. For example, a Boyolali-based batik business successfully recovered from the pandemic’s negative impact through e-commerce retail exports to global markets (Rosari, 2023). Additionally, Minister of Industry Agus Gumiwang Kartasasmita also reported that batik exports actually surged during the COVID-19 epidemic to 21.54 million US dollars in January-July 2020, up from 17.99 million US dollars the previous year, with Japan becoming a key market. However, it is important to note that these export activities through e-commerce may not be as seamless if they are not based on the prospective country’s trade agreement. Therefore, in the case of Batik exports to Japan during a pandemic, it is suggested that the successful act is supported by the IJEPA facility.
IJEPA has been a critical platform for Indonesia to continue exporting to Japan, despite the global lockdowns and trade restrictions that have resulted from the epidemic. This assertion is corroborated by the Direktorat Jenderal Mineral dan Batubara Kementrian Energi dan Sumberdaya Mineral (2020, as cited in Salsabil et al., 2022), which demonstrates that trade operations between Japan and Indonesia under IJEPA have been largely unaffected by the epidemic. Referring to the data, Badan Pusat Statistik (2021) reported that Japan continues to be a key export partner for Indonesia, with an export value of US $1.25 billion. Arguably, this success is highly attributed to the bounded trade commitment cooperation between the two nations through the FTA. Here, IJEPA serves to reinforce the two nations’ commitment to cooperation and economic assistance through trade, investment, and development, regardless of economic conditions. Japan’s ambassador to Indonesia, Kanasugi Kenji, also stated that Indonesia and Japan are obligated to exchange wisdom—that is, to collaborate and provide assistance to one another —even in the face of the COVID-19 epidemic (Pebrianto & Silaban, 2021).
The provision of IJEPA to reduce and potentially eliminate tariffs on Indonesia’s product exports to Japan has also attracted Indonesian MSMEs to engage in exports to Japan during the pandemic. During this time, businesses will aim to identify markets that offer lower entry costs for their exports, as pandemic compelled businesses to reduce their expenditures. The implementation of low to no tariff policies in international trade facilitates the entry of goods from partner countries without the burden of duties, appealing to businesses aiming to reduce costs and enhance their competitiveness in the global market (Vella, 2023). Echoing this, it is arguable that businesses prefer to engage in exports to countries that have trade agreements, such as Free Trade Agreements (FTAs), over those that do not. The comparison of Indonesia’s Batik MSMEs’ exports to France and Japan clearly illustrates this point. In evaluating Indonesia’s Batik exports to France, a region lacking a free trade agreement with Indonesia, it is observed that the export volume is relatively low. According to the data provided by Ahdiat (2022), in the year 2020, during the pandemic, the export of Batik to France did not reach one billion. Regrettably, even in the subsequent year when the pandemic situation has shown improvement, it is projected to yield a trade figure of approximately only 1 million. Conversely, Japan was one of the top ten destinations for Indonesia’s batik exports in 2021, with a total of 2 million batiks exported during that year. This indicates that the IJEPA agreement between Japan and Indonesia has facilitated Indonesian businesses in enhancing their exports internationally, while avoiding oppressive tariffs.
In conclusion, it is evident that the formation of IJEPA has provided advantages for Indonesia Batik’s MSMEs regarding exports during the pandemic. Through their steadfast dedication to collaboration during challenging periods, the IJEPA has effectively afforded Indonesian Batik enterprises an attractive international market characterized by cooperation and economic viability.
