Posted by: mel | December 13, 2009

Indonesia Unfazed by Chinese Free Trade Deal

Jakarta Globe | Dian Ariffahmi & Dion Bisara | 13 December 2009

The government remains upbeat the country’s manufacturing sector growth will rebound in 2010, despite warnings from some industry players that a free-trade pact with China, which takes effect on Jan. 1, will seriously hurt the sector.

According to Finance Ministry figures released on Friday, the manufacturing sector is expected to grow 3.8 percent next year, rebounding from a projected growth rate of 1.9 percent this year. The sector grew 3.7 percent in 2008.

Local manufacturers have been struggling to overcome the impact of the global economic slowdown. Soon they will face increased competition from Chinese producers, with cost advantages, as a result of the Asean-China Free-Trade Agreement.

The Finance Ministry said the sector would benefit from a global and domestic economic recovery. The government sees Indonesia’s economy expanding by 5 percent to 5.5 percent in 2010, compared with 4.3 percent this year.

“You don’t have to be that worried with this opening [of trade barriers], said Bambang Prijambodo, director for economic planning at the National Development Planning Board (Bappenas).

“This is actually a big challenge for all of us on how to make ourselves more competitive,” he said.

The global economic recovery will help domestic manufacturers earn higher revenues from their exports, Bambang said.

In October, the International Monetary Fund predicted that the global economy would grow by 3.1 percent next year, compared with a projection of negative 1.1 percent growth in 2009.

Ernovian Ismy, secretary general of the Indonesian Textile Association (API), said the Finance Ministry’s prediction was realistic and that the global recovery may lift exports. But he added that the government should help domestic manufacturers survive the arrival of the flood of cheap Chinese imports.

“We are forecasting exports of textile products to rise by around 6 percent to $10.6 billion from $10.03 billion this year. But to make the prediction realistic, the government must help the local manufacturers to keep dominating the domestic market. For the textile sector, it would be just great if we could maintain our current 60 percent share.”

Industry Minister MS Hidayat said the government would ask Asean to give Indonesia “special status” to allow officials to open talks with the body about whether those industries most at risk from Chinese competition could be given temporary exemptions from the FTA.

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