Government Educates Indonesian Businesses on Entering Middle Eastern MarketsDecember 27, 2021
JAKARTA – The government continues to push more exports to the Middle East region.
Two markets that they want to improve further on is Saudi Arabia and the United Arab Emirates (UAE), by educating export opportunities to prospective industries and businesses in Indonesia.
In 2020, Saudi Arabia was named Indonesia's 21st largest export destination, with a total value of US$1.34 billion. Saudi Arabia is also a major source of imports for Indonesia, with a total value of US$2.61 billion, making it the 14th largest. Indonesia's main exports to Saudi Arabia include passenger cars, palm oil, fish, plywood and cloth materials. Meanwhile, Saudi Arabia exports mainly its plastics, organic chemicals, nuts, chemical products and dairy products to Indonesia.
Saudi Arabia has a population of around 34.7 million. From that amount, there are three separate market segments: the regular market (which comprises of 21 million people, or 70% of the population), the expatriate market (14 million people) and the seasonal umrah and haji markets.
"The regular market comprises of natural citizens of Saudi Arabia, and they are our main target market for Indonesian goods. Because, when Indonesian goods circulate and are accepted in the regular market, the consumption of Indonesian goods will be stable and sustainable," explained the Head of the Indonesian Trade Promotion Center (ITPC) in Jeddah, Saudi Arabia Muhammad Rivai Abbas on Thursday (11/11).
However, Rivai said that the umrah and haji markets are also a major market to focus on as it is this market that tends to provide the best opportunity for Indonesian goods to enter the Saudi Arabian market. In 2020, a memorandum of understanding (MoU) was signed between Indonesia's Trade Ministry (Kemendag), Religious Affairs Ministry (Kemenag), Small-to-Medium Scale Businesses and Cooperatives Industry (KemenkopUKM) and the Indonesian Chamber of Commerce (Kadin) on the optimization of fulfilling Indonesian hajj pilgrim demands to exclusively use Indonesian products, especially ones from micro, small and medium scale (UMKM) businesses.
"Through this MoU, we are encouraging UMKMs to participate as it presents them with a large opportunity to enter a significant market. Potential Indonesian products that can be utilized by hajj and umroh pilgrims include clothing, accommodation services, food, cosmetics, bags and footwear," Rivai elaborated.
Saudi products hoping to enter the export market must be registered beforehand through institutions such as the Saudi Food and Drugs Authority (SFDA) while products wanting to enter the Saudi market must be registered and cleared by the Saudi Arabian Standards Organization (SASO).
"Products entering the Saudi market must be registered by the importer or buyer. In addition, it is also necessary to pay attention to the fact that when entering the Saudi market, one must consider intellectual property rights requiring trademarks in order to prevent possible disputes in the country," Rivai said.
Furthermore, Rivai added that Saudi Arabia is currently running the Saudi Vision 2030 policy, which is a strategic framework to reduce Saudi Arabia's dependence on oil exports to diversify its economy and develop its public service sectors such as health, education, infrastructure, recreation, and tourism.
"The Saudi market is an open one, which means products entering it must compete in terms of price, quality and sustainability because there are a lot of players in the market. That is why Indonesian exporters must prepare their products to be able to compete in the Saudi market in the long run," he said.
Meanwhile, the head of the ITPC in Dubai, UAE, Muhammad Khomaini explained a little about the conditions in the country. The country is made up of 9.83 million people, with only 11% made up of natural born citizens, while the rest are made up of expats and immigrants. Trade products in the UAE are subjected to an customs tax of around 5%. Currently, Indonesia and the UAW are in the middle of forming the Indonesia-United Arab Emirates Comprehensive Economic Partnership Agreement (IUAE-CEPA). One of the issues outlined in the CEPA is the possible reduction of customs and import tariffs.
"Both countries are confident that the CEPA will be completed in the span of one year since first being presented in Bogor, West Java in September 2021. It is hoped that with this agreement, Indonesia's trade balance with the UAE could increase by 2x or even 3x," Khomaini said.
To handle imports and exports, the UAW has a national standardization institution, the Emirates Authority for Standardization and Metrology (ESMA). This institution functions to develop and adopt certain standards prepared by the technical committees according to international and regional standards. In 2018, the ESMA signed an MoU with the National Accreditation Committee (KAN), requiring that all Halal certification issued by Indonesian Halal certification institutions such as the MUI, must also be approved by the ESMA before entering the UAE market. By doing so, Indonesian products which have already acquired MUI certification are able to enter the UAE market with ease.
"Products wishing to enter the market only need to meet the registration requirements from the UAE. Products entering the market must also use two languages, mainly Arabic and English, as both are the languages used daily in the country," Khomaini said, emphasizing the fact that UAE cities such as Dubai act as global hubs for the Middle East and North Africa.
Between January and April 2021, UAE trade data showed that the value of re-exports were almost 50% compared to its imports, illustrating the enormous potential of the UAE market and Dubai as an international hub.
Indonesia's main export products to the UAE include palm oil, jewelry, monitors, vehicles, and paper boards while Indonesia mainly imports gasoline, iron, unwrought uranium, organic chemicals and plastics from the UAE.
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