The Indonesian Chambers of Commerce and Industry (Kadin) says Indonesia needs clear-cut strategies to protect local products amid a mushrooming number of bilateral and regional free trade agreements.
Such protection could be in the form of incentives or policies that favor local businesses, Kadin's vice president of trade and distribution, Ketut Suardhana Linggih, said on Thursday.
Developed countries like Japan and the U.S. resorted to protectionism to a certain degree and maximized the benefits of their trade deals, Ketut said.
"Free trade has been unfair to Indonesia because it has no strategies to protect its local products," he said on the sidelines of a Kadin national meeting, pointing out that the U.S. had been protective of its local market despite its active involvement in the global free trade movement.
"The U.S. supports free trade very much. Meanwhile, it also has a strong commitment to protecting its local industries."
Indonesia recently secured a trade agreement with Japan under the economic partnership agreement (EPA). Under the ASEAN framework, Indonesia is also working to build a similar deal with Australia, New Zealand and China.
Kadin head M.S. Hidayat said the government needed strategies so as not to miss out on opportunities presented by free trade deals while protecting local industries.
"The government must draw up a blue print of strategies as how to deal with other countries," he said.
Domestic products the government could protect in the local market include textiles and batik.
"In the past, locally made textiles dominated Tanah Abang markets (central Jakarta). Nowadays, 70 percent of the products sold there are made in China -- with good quality and lower prices," he said.
Protection from the government could be in the form of numerous incentives for local businesses.
"The government could provide loans with low-interest rates for local businesses with export orientation," he said.
Commenting on the credit crisis in the U.S., Hidayat expected Indonesia's exports to the U.S. to decline in the third and fourth quarters because of the collapse of Lehman Brothers and American International Group Inc (AIG).
Indonesia's non-oil and gas export value to the U.S. stood at US$7.43 billion in the first seven months of this year, up by 15.37 percent from $6.44 billion for the same period last year.
Hidayat said Indonesian businesses were now considering redirecting their export aims to African countries, including South Africa, the Middle East and other Asian countries.