Notwithstanding regular complaints from local firms about disguised protectionism overseas, the country’s most influential business association appears to want the government to resort to similar tactics to stem a predicted flood of Chinese imports riding on the back of the Asean-China Free Trade Agreement. This agreement is set to come into effect next year.
“With more sectors to be liberalized under the agreement, a number of manufacturing associations want to see the government take action to prepare the industrial sector for increased competition on the local and overseas markets,” said Benny Soetrisno, Indonesian Chamber of Commerce and Industry (Kadin) deputy chairman for overseas trade, logistics and distribution, on Thursday.
Indonesia ratified the original framework agreement laying the foundations for the deal in 2004.
Benny said with tariffs due to be eliminated on a large number of goods on Jan. 1, Chinese products threatened to swamp the domestic market.
To prevent this, he said the government needed to insist on compliance with the country’s industrial standards for both local and imported products. “Other measures to curb imports could take the form of the greater use of safeguard and antidumping measures,” he said.
Benny added that the government needed to work on improving the attractiveness of local products to overseas buyers. “To ensure the competitiveness of our products, the government has to help industry by accelerating infrastructure projects in the highway, port and power sectors,” he said.
He also noted that if the FTA takes effect, tariffs would be eliminated on 6,682 types of goods in the textile, food and beverage, footwear, electronics, agriculture, fisheries, energy and mineral resources sectors.
“Though we previously called on the government to delay the harmonization of tariffs next year, we now understand that Indonesia and the other Asean members have no other option than to prepare for future competition with China,” he said.
Benny said the situation was particularly serious as the country ran a constant trade deficit with China, which amounted to $3.61 billion in 2008, while Indonesia’s overall trade surplus dropped 40 percent to $23.31 billion in 2008 from $32.75 billion in 2007.
In the non-oil and gas sector, a surplus of $79 million in 2004 turned into a deficit of $7.16 billion in 2008, he said.
Separately, Singgih Witarso, the executive director of the Indonesian Footwear Association (Aprisindo), said China was much better prepared for the implementation of the agreement than Indonesia and the rest of Asean.
“In particular, China is already highly industrialized and has a much more integrated industrial structure, which also enjoys greater government support compared to what we get in Indonesia,” he said.
Singgih also said the association feared that sales of locally produced footwear could slump from about Rp 10 trillion this year to only about Rp 5 trillion after liberalization of the sector in 2010.