A study by the Indonesian Young Entrepreneurs Association has found that more than 70 percent of products from small- and medium-sized industries sold in Indonesia in the six months to June were imported from China. (AP Photo/Tatan Syuflana) A study by the Indonesian Young Entrepreneurs Association has found that more than 70 percent of products from small- and medium-sized industries sold in Indonesia in the six months to June were imported from China. (AP Photo/Tatan Syuflana)
Jakarta. A wide range of Chinese goods has flooded Indonesia since the Asean-China free-trade pact took effect on Jan. 1, the Indonesian Young Entrepreneurs Association has warned.
A new study by the association, known as Hipmi, showed that more than 70 percent of products from small- and medium-sized industries sold in Indonesia in the six months to June were imported from China.
The goods range from electrical equipment and metal products to plastic goods, garments, automotive spare parts and even packaged fruits.
A similar survey conducted by the association in 2004 found that Chinese goods in the same categories had only 15 percent of the market share.
The new study, conducted across all 33 provinces, is the first to provide figures to confirm fears that cheap Chinese goods are swamping Indonesia under the free-trade agreement between China and the 10 states of the Association of Southeast Asian Nations, which includes Indonesia.
Harry Warganegara, the association’s head of international trade, said on Saturday that one of the reasons for the jump was because local consumers were “sensitive” to price differences.
Harry said the association’s findings were in line with Central Statistics Agency (BPS) data. The agency said imports from China totaled $8.99 billion in the first half of this year, up from $5.9 billion in the same period in 2009.
“Chinese products, which have been flooding the market, present the government with a serious challenge to improve the competitiveness and efficiency of domestic industries,” Hary said. “If it does not take concrete steps, the competition will become tougher in the second half of 2010. And it is only going to get tougher in the coming years, especially as local producers will be struggling with issues such as Indonesia’s relatively high interest rates and higher electricity rates.”
Local producers also face the problem of poor infrastructure.
Prasetyantoko, an economics lecturer at Atma Jaya University in Jakarta, said: “The agreement serves as a double-edged sword. It benefits Indonesia because it makes us more open to globalization, but there are consequences. The flooding in of Chinese goods will force us to increase our competitiveness, and we have no choice but to do this.”
Other economists, including Ma Tieying, with DBS Group Research, have said the effect of the pact is being overstated as import tariffs between China and Asean countries had already been gradually scaled back from 2005.
Indonesian Trade Minister Mari Elka Pangestu signed the deal in 2004 after years of negotiations. It established the world’s third-largest free-trade area, after the European Union and the North American Free Trade Agreement, connecting 1.9 billion people with a combined GDP of $6.6 trillion and total trade among members of $4.3 trillion.