In August 20 2007, Indonesia entered its first bilateral free trade agreement with Japan
under the Indonesia-Japan Economic Partnership Agreement (IJEPA). The content of IJEPA as a
bilateral free trade agreement itself is typical to any other free trade agreement
contents. Yet, the existence of the Manufacturing Industry Development Center (MIDEC)
clause aimed as an assisted capacity building program within the agreement as a
compensation for Indonesia’s willingness to join the economic partnership agreement can be
considered as a unique and irregular feature of a bilateral free trade agreement.

Questions regarding the feasibility of such form of cooperation program are often raised. Yet, studies concerning the current implementation state of the MIDEC capacity building program as well as how to improve IJEPA in the next renegotiation by individuals from outside the government are non-existent at the time when this study was conducted. Hence, the objective of this study is to become the first study regarding MIDEC by non-government individual and to identify whether MIDEC’s capacity building program, specifically in the welding and energy conservation capacity building program has been implemented successfully to its full potential during the duration of 2008-2013 as well as being able to give recommendation on how to improve IJEPA on the upcoming 2015 renegotiation through information obtained from case study based on interview with individual(s) involved within the capacity building program (MIDEC) in order to compliment and compare the evaluation of MIDEC made by ministry of industry of Indonesia in 2014 concerning the implementation of MIDEC as an assisted capacity building program as well as individual involved with the implementation of IJEPA.

Study based on 'case study' obtained through interview suggested that MIDEC’s welding and energy conservation program has been implemented successfully for welding and sufficiently for energy conservation capacity building program. Yet, problems such as language barrier, lack of human resources in coordination process and lack of specialized training contents are only some examples of problem faced by the Indonesian government in implementing the program to its full potential. While under-utilization of the service sector, widening trade value gap between Indonesia and Japan, ineffective investment policy and lack of competitiveness of product are examples of what Indonesia lacks within IJEPA. Thus, for the purpose of obtaining full benefit of the signing of IJEPA, Indonesia should put these matters into consideration for the upcoming renegotiations in 2015.

Keywords: Bilateral Free Trade, MIDEC, Indonesia-Japan Economic Partnership Agreement
(IJEPA), Capacity building, Welding, Energy Conservation, Industry
References: 39 references