Posted by: mel | November 25, 2009

Get Ready For Asean-China Free-Trade Pact: Indonesian Industry Minister

Jakarta Globe | Dian Ariffahmi & Irvan Tisnabudi | 25 November 2009

An Asean-China Free-Trade Agreement is coming, whether Indonesian producers “are ready or not,” Industry Minister MS Hidayat told lawmakers on Wednesday.

Industry Minister MS Hidayat said the Asean-China FTA is on its way. (JG Photo)

The FTA will allow thousands of products from China to enter Indonesia with no import duties.

“I have been trying to renegotiate [the deal] with all parties, but I have to admit, it was very difficult to do so, considering we only have one month left” before the FTA comes into force, Hidayat told the House of Representatives Commission VI on trade and industry.

He said renegotiating the deal would be extremely difficult because six of the 10 members of the Association of Southeast Asian Nations, including Indonesia, had agreed to proceed with the agreement.

It made little sense to complain now, he added.

China signed a preliminary pact for a free-trade deal with the 10 members of the Asean, including Indonesia, in November 2002. Parties have agreed to gradually scrap import duties on a wide number of products by 2012.

As part of the deal, import duties will be removed on 6,682 types of Chinese goods starting on Jan. 1.

The domestic business community fears that the manufacturing sector will suffer. Millions of workers are employed in sectors including textiles, footwear, automotive products, electronic goods, petrochemicals, steel and metals.

The lawmakers in attendance largely ignored Hidayat’s explanation. In response, commission chairman Airlangga Hartarto said domestic producers would find it difficult to compete as the Chinese “industry was well-integrated from production to distribution in a very efficient way.”

In a separate interview with the Jakarta Globe, Hidayat Triseputro, executive director of the Indonesian Iron and Steel Industry Association (IISA), said eliminating import duties on Chinese goods would allow China to practice what he called a form of “market colonialism.”

“China’s products are well-known for being cheap and it is the toughest competitor in Indonesia,” Hidayat Triseputro said. “Besides, most Indonesian producers are already importing their raw materials from China. With zero tariffs, local steel producers would find it extremely hard to compete.”

He added that he would not be surprised if his industry collapsed next year.

However, Rachmat Gobel, the deputy chairman of the Indonesian Chamber of Commerce and Industry (Kadin), and head of the country’s biggest electronics firm, PT Panasonic Gobel, was more circumspect.

At a seminar on competitiveness on Wednesday, he said producers would have “no choice but to embrace the inevitable free-trade market, but at least some good is expected from the deal.”

“With the FTA, it is hoped that illegal imports would be minimized because they threaten our local industries,” he said.

Last month, Trade Minister Mari Elka Pangestu said renegotiating the FTA was not the only way to solve the problem.

“[Industries] need to assess what their problems are and find the solutions,” she said.

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