Government may provide incentives if needed for industries negatively affected by full implementation of the free trade agreement between ASEAN countries and China (ACFTA), Finance Minister Sri Mulyani Indrawati said Tuesday.
The government will also impose tariffs temporarily on two products - concrete wire (bendrat) and aluminium foil - due to surging imports after full implementation of ACFTA, threatening local industries, Trade Minister Mari Elka Pangestu said.
“There will be an investigation to follow,” she said to the press.
ACFTA was effective as of Jan. 1, with 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 local industries cope with the negative effects of ACFTA, Mulyani said the government would boost competitiveness via improvements to infrastructure and by cutting tax rates.
“But if they need additional steps that are supportive, and there will be implications to the state budget ... Then the state budget has space to provide support that is selective and measured,” she said, adding that the government is in the process of revising the 2010 state budget.
Coordinating Economic Minister Hatta Rajasa said Indonesia had a team to help cushion any negative impacts from the ACFTA.
The team’s tasks include protecting the domestic market from smuggled goods; supervising the issuance of import documents; expanding export markets; helping to improve the domestic market; and promoting local products, he said.
“We don’t want to see the ACFTA [only] in negative ways, but also in positive ways,” Hatta said.
Standard Chartered economist Tai Hui said the ACFTA in the long run would benefit all the countries involved.
He said Indonesia could import cheaper raw materials from China to build infrastructure, while selling commodities to China.
Hatta said based on data from the customs and excise office, there had yet to be an import surge after ACFTA has become fully effective.
“We have an early warning system, which can detect whether there are surging imports that may injure local industries,” he said.
“We want trade to increase. We also want to have a surplus in the balance of payments.”
Earlier in the day, Hatta said the trade minister has begun preliminary discussion with China and other related parties to swap some tariff posts that were cut to zero this year with other posts that will see the tariff cut to zero in 2011 or 2012.
The government expected this move could protect local industries found to be negatively effected by the full implementation of the ACFTA.
Standard Chartered Bank economist Fauzi Ichsan said textiles, toys and footwear could be hit hard by the effects of ACFTA because China could produce cheaper products.
Businessman Rachmat Gobel has asked the government to provide incentives for certain industries hit after the ACFTA has become fully effective with zero tariffs.