While local industries are seeking a delay in the full implementation of the free trade agreement (FRA) with China, to start in January, China says this stands little chance of succeeding.
The heads of agreement for the Indonesia-China FTA - which forms part of the wider ASEAN-China FTA - was signed in late 2004. Its full implementation will start on Jan. 1 when some tariff barriers for certain product categories, such as several textiles and garment products will be fully dismantled.
This has led to a well-publicized national debate over the impact this could have on local manufacturing industries, with business associations lobbying government to seek temporary delays in implementation of FTA provisions to help protect national industries.
The Trade Ministry’s director general for international trade cooperation Gusmardi Gustami has even said the government would be willing to discuss delays with China.
However on Monday, Chinese Ambassador to Indonesia Zhang Qiyue said that China had not received any official proposals
from the Trade Ministry to renegotiate, but added that it was very difficult to delay the implementation of the FTA, which actually started to be gradually implemented in 2005.
“The arrangement has proceeded step by step, from as early as 2005, [with] special free trade [provisions]for agriculture, fruits and many others [which] have already started. It is not something new and we are almost there,” she said.
Moreover he said: “The arrangement has been discussed for years and I think it is important the FTA be launched fully starting from Jan. 1 next year.”
The FTA with China has alarmed industry sectors facing possible losses as they have to compete with the country whose many products have dominated the market even before the FTA starts.
“We must see it [the FTA] in a very comprehensive way... It will bring a lot of benefits for both sides; It’s not an arrangement that will only benefit China,” Zhang claimed.
She said that under the FTA scheme for instance, Indonesian textile industries can purchase machinery with prices as low as one third of the normal cost in order to upgrade their aging machinery.
“The service sector will also develop with the free flow of people... for example the tourist industry,” she said. “Chinese tourism is really growing and we have become the third largest foreign tourist
contingent coming into Bali and the number is on the rise on a yearly basis.”
She said the FTA would also facilitate investment from China to Indonesia to help support its economic growth, which is “crucial for the implementation of Indonesia’s 100-day program and five year plan”.
In a hearing earlier this month, the House of Representatives’ Commission IV overseeing industry warned the government about the China FTA, saying it would put at least 10 industry sectors in jeopardy.
The commission identified the sectors at risk as including textiles, food and beverages, petrochemicals, agricultural equipment, footwear, synthetic fibers, electronics, machinery, engineering services and the steel industry.
The Indonesian Textile Association (API) for instance, has proposed a postponement for 94 textile and garment products classified as Normal Track 1 products, which were to have gradual tariff cuts from July 2005, reaching 0 percent in January next year.