Wed, 27 Jan 2010
From: The Jakarta Post
By Aditya Suharmoko and Erwida Maulia, The Jakarta Post, Jakarta
President Susilo Bambang Yudhoyono said the free trade agreement between ASEAN and China (ACFTA) would not threaten Indonesia’s industries, but create opportunities for local businesses to export more goods.

He also said the government would strengthen the competitiveness of local industries against cheaper Chinese products flooding the local market, while pursuing renegotiation of some tariffs with China.

“Don’t think that with the agreement we will be flooded by goods exported by China. We can export many of our products. This is not a threat, but an opportunity.

“We can expand, and raise our exports,” Yudhoyono said Monday at the Indonesian Military headquarters in Cilangkap, East Jakarta.

He did not mention which products might see higher exports.

The ACFTA - based on an agreement signed in 2004, has been gradually phased in and became fully effective on Jan. 1 this year - introducing zero tariffs on 6,682 tariff posts in 17 sectors including 12 in manufacturing and five in the agriculture, mining and maritime sectors.

To help protect local industries, the House of Representatives’ commission VI overseeing industry and trade has demanded that the

government renegotiate 228 tariff posts covering garments, furniture and footwear, among others. It has given the government six months to do this.

Analysts said industries producing textiles, toys and footwear could be hit hard by the ACFTA because China could produce cheaper products.

According to the latest data from the Central Statistics Agency (BPS), Indonesia imported US$12.01 billion of non-oil-and-gas products from China between January and November last year, down 14.7 percent from $14.08 billion in the same period in 2008.

Meanwhile, Indonesia exported to China $7.71 billion of non-oil-and-gas products between January and November last year, up 5.47 percent from $7.31 billion in the same period the year before.

Total exports between January and November last year were $86.64 billion, or down 13.71 percent from the same period in 2008; while imports were $69.69 billion, down 24.22 percent, BPS said.

The government may provide direct incentives if needed for industries negatively affected by the ACFTA, Finance Minister Sri Mulyani Indrawati said.

The government will also improve infrastructure to help cut costs and has cut tax rates to support industries, she said.

The government has a team to help cushion the economy from negative impacts from the ACFTA, Coordinating Economic Minister Hatta Rajasa said and its tasks included protecting the domestic market from smuggled goods; supervising the issuance of import documents; helping expand export markets; helping to improve the domestic market; and promoting local products.

Said Hartono, chairman of the Indonesian Rural Banks Association, said many micro-, small- and medium-sized enterprises may close their businesses if the government does not strengthen supporting policies to cushion the negative impacts of the ACFTA.

“If they are forced to compete against large-capital industries, they are not ready. It can be predicted that they may shut their businesses,” he said.



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