Govt, firms work to fend off impacts of China FTA

Aditya Suharmoko ,  The Jakarta Post ,  Jakarta   |  Tue, 12/22/2009 9:38 AM  |  Business

Full implementation of  the free trade agreement (FTA) between ASEAN countries and China will start on Jan. 1 next year despite resistance from some local firms, but the government undertakes to protect local industries.

“We will make a modification [of the regulations], which may take a few months,” Industry Minister M.S. Hidayat said Monday after a meeting with economic ministers and businesses.

“What’s important is for the government to prevent smuggling and to effect non-tariff measures such as safeguards and anti-dumping.”

Local industries fear the FTA will hurt them while it further benefits China, whose products have dominated markets here as they mostly offer cheaper prices.

Sri Adiningsih, economist of the University of Gadjah Mada, said some local industries had failed to compete with Chinese products, even before the elimination of the latest import duties.

“Some have closed their business, or cut production. Some now even import [Chinese products] and put local brand [names] on them.”

The heads of agreement for the Indonesia-China FTA — which forms part of the wider ASEAN-China FTA — was signed in late 2004. Its full implementation will start on Jan. 1 when some tariff barriers for certain product categories will be fully dismantled.

There are 314 tariff posts from eight sectors regulated under the FTA. The eight sectors include steel, textiles and textile products, electronics, footwear, furniture, organic chemicals, petrochemicals, foods and beverages.

With the FTA, some products will  be rated with an import duty of 0 percent starting Jan. 1 next year.
Hidayat, himself the chairman of the Indonesian Chamber of Commerce and Industry (Kadin), said the government would meet businesses soon to design the modification of the regulations in order to protect local industries.

Sofjan Wanandi, an advisor to Kadin, said there would be a revision of existing regulations and new regulations. But he refused to elaborate for fear there might be retaliation by China.

“There will be new regulations, tightening of existing regulations; non-tariff measures, safeguards, [and other] trade barriers,” he said, adding that the regulations would be finished within six months.

“The government and businesses have agreed to protect local industries,” he said.

Sofjan, who also heads the Indonesia’s Employer Association (Apindo), added that the government should focus on improving infrastructure to cut the high-cost economy and to boost competitiveness of local industries. Lagging infrastructure has caused high logistic costs.

Coordinating Minister for the Economy Hatta Radjasa assured business leaders that the government would protect local industries. “We surely have to give protection to national industries by taking measures. Do not let our industries get hurt.”

He said the Industry Ministry, Trade Ministry and Agriculture Ministry are discussing which of the 314 tariff posts will be modified.

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