By the 23rd of June 2016, the United Kingdom (UK) will have a very important referendum in their history deciding whether they remain or leave the European Union (EU). This referendum has divided the country into two blocks, “remain” and “leave” teams. The latest polls predicted that the result will be very tight. Both teams say that this referendum is even more important than the general election for the British people because it would decide how the UK interacts with its closest neighbours, the European countries.

Two key debates in this referendum are strongly focused on immigration and trade agreement with other countries. Just like in many western countries, immigration is a massive issue in the UK politics. There is no doubt that the high-skilled immigrants are good for the host economy. The high-skilled immigrants produce net benefits for the host country because they boost the productivity, run businesses, create jobs and pay taxes. These are the key arguments, as used by the remain campaigners, to say that immigration creates net benefit for the UK.

The debate becomes fascinating when we discuss the impact of low-skilled immigrants to the economy. In contrast to remain team, the leave campaigners claim that immigrants have generally a bad impact on the UK economy at least for two reasons.

First, many immigrants in the UK exploit the country’s social benefit, like housing, child and healthcare benefits. Even, in many cases, immigrants working in the UK intend to earn only limited income which is under the poverty line so that they can still claim and get the benefit from the government. Then, they transfer the money that they earn in the UK to their home country in which the living cost is way much cheaper. Consequently, as the leave campaigners argue, this phenomenon suffers the UK government expenditure implying a huge amount of public debt.

Secondly, the immigrants lead the British people’s quality of life declines. The leave campaigners claim that a high volume of immigration in this country brings the wage stagnant (even down), while the housing prices rocket meaning that the Britons earn less but they have to pay a higher living cost.

Compared to other European countries, the UK is one of the most favourite countries (even probably the most favourite one) for the European citizens to work because the UK has a good economic performance and they, of course, speak English. Post-the global financial crisis in 2008, unlike many other countries, particularly in the southern part of Europe such as Greece, Italy and Spain, the UK has a far better economic condition: the economic recovery was faster, the unemployment rate remains low, many jobs are available and the UK has a better social benefit system.

On the other hand, it is more challenging for other European citizens if they want to work in other places outside the UK because other countries typically require the employees to be able speak the host country’s native language fluently. For instance, if someone desires to get a job in Germany, he should be able to speak Germans properly to increase his chance in securing the job. This language barrier is also one of the “shadow” strategies for the non-UK countries to protect jobs for their native people/citizens so that the country could not only earn benefits from the high-skilled workers, but also protect jobs for their people.

The second main theme of the Brexit debate is about the future of UK’s economic partnerships with other countries. The remain campaigners argue that leaving the EU would be a disaster for the UK economy. The argument is because the EU countries are the main UK’s trading and investment partners, about half of UK’s trade and investment are related with the EU countries. Thus, leaving the EU could deadly harm this economic cooperation.

On the other hand, the leave campaigners believe that the UK could still maintain its relationship with other EU countries, albeit no longer part of EU member. The leave campaigners argue that by leaving the EU, the UK will gain more benefits because one hand they could still maintain its relation with EU countries, while on the other hand the UK could be much more flexible and independent to create trade and investment deals with other major economies, like the US, Australia, Canada and Emerging Markets (including Indonesia).

Therefore, if the referendum result shows that the UK leaves the EU, the Indonesian government should be more proactive to create new trade and investment deals with the UK. In the last few years, the bilateral relationship between the UK and Indonesia is getting closer and closer.

Last year, David Cameron-the UK Prime Minister, visited Indonesia. Then, about two months ago Joko “Jokowi” Widodo-the Indonesian President came to London signing many new trade and investments deals. In addition, in 2014 the Ex-mayor of London, Boris Johnson also visited Jakarta.

From higher education point of view, the UK is also getting more and more popular for Indonesian students who want to continue their study. In the last two years, hundreds Indonesian students, particularly who get full scholarship, prefer to continue their study in the UK rather than any other countries.

For example, about a quarter of LPDP scholars (i.e. the largest scholarship providers for Indonesian students) studying abroad, they study in the UK. Furthermore, a scholarship from the British government (i.e. Chevening) nearly tripled its quota for Indonesian students to study in the UK this year, increase from 23 places in 2014 to be 66 in 2015. In addition, few months ago Indonesian Ambassador in the UK also officially announced a strategic partnership between the Indonesian and British scholars funded by the Newton Fund to develop science and innovation in Indonesia.

In short, despite its pro-cons about the impact of Brexit on the British and world economy, Brexit might be an opportunity for Indonesia to strengthen its cooperation with the UK. Higher education (including development of education, science and innovation) and finance are two highly recommended sectors that could be developed because the UK has many leading universities and research institutes, and its capital, London, is the centre of world finance.

 

San Francisco, California.

June 21, 2016.

Note:

Picture downloaded from http://www.pikiran-rakyat.com


On October 25, 2016, for months after I published this article, I got an email from the Asian Development Bank (ADB) sharing about their latest news. In that news, the headline was about an opinion by Ganeshan Wignaraja – Advisor at the Economic Research and Regional Cooperation Department of the Asian Development Bank. I and Ganeshan have pretty similar thoughts about the impact of Brexit on the non-European countries economy, including Asia (e.g. Indonesia). You can read Ganeshan’s article here.

Advertisements