China and the WTO: Teaching RI some lessons<\/p>\n
Hans W. Vriens, Contributor, Jakarta<\/p>\n
China and the WTO, Changing China, Changing World Trade
\nBy Supachai Panitchpakdi and Mark L. Clifford
\nJohn Wiley & Sons (Asia) Pte Ltd, 2002
\nUS$21.95<\/p>\n
Since I moved from Hong Kong to Jakarta two years ago I have been
\nstruck by the extent to which developments in China are
\nmisunderstood in Indonesia.<\/p>\n
Even respected analysts in Jakarta regularly ventilate ill-
\nformed opinions like, \"China is much more corrupt than Indonesia\"
\nor \"China's economy is a mess similar to Indonesia's. As a result
\nBeijing will never succeed in reforming its state-owned
\ncompanies\", and finally, \"the court-system in China is just as
\ncorrupt as in Indonesia\".<\/p>\n
I would advise all those analysts to pack their bags and spend
\na few months in China or, second-best, read this recently
\npublished book. Written by Dr. Supachai Panitchpakdi, the
\nincoming director-general of the World Trade Organization (WTO)
\nand Mark L. Clifford, the Hong Kong-based Asia Editor for
\nBusinessWeek, it is a must read for anybody who cares about the
\neconomic future of Indonesia.<\/p>\n
For the rest of Asia, and Indonesia in particular, China's
\neconomic rise and its accession to the WTO should be a resounding
\nwake-up call. To put it in perspective: No country in history has
\nburst onto the world trading stage like China. It was less than a
\nquarter-century ago, in December 1978 to be precise, that China's
\nleaders first adopted their initial economic reform program of
\nwhat was then a state-control-led economy.<\/p>\n
Rising powers are inevitably disruptive to the existing order.
\nChina's rise to become an economic powerhouse promises to be very
\ndisruptive for Southeast Asia and Indonesia in particular.<\/p>\n
A bellwether event for Indonesia will be the elimination of
\nquotas on garments and textiles (the Agreement on Textiles and
\nClothing) at the end of 2004. A highly productive army of Chinese
\nwill be producing even more goods, more cheaply than ever before.
\nWorld Bank studies show that Chinese apparel production is
\nexpected to nearly quadruple in the coming decade. The export
\nnumbers look even more staggering.<\/p>\n
Its share of the total world export market will surge to more
\nthan 47 percent compared with 15 percent in 1997. In others
\nwords, nearly half of all exported clothing will be made in China
\nin 10 years time. One will find the same kind of scary statistics
\nin other sectors such as computers and electronics. Most toys are
\nalready produced in China.<\/p>\n
One wonders what Indonesia's strategic plan is to deal with
\nthis potential onslaught on its labor-intensive industries like
\napparel and footwear. One wonders.<\/p>\n
I have seen no proof that Indonesian policymakers are acting
\non what looks like a ticking economic time bomb. Rather the
\nopposite. A 39 percent rise in the minimum wage and policies that
\nmake it very difficult and expensive to lay off staff seem
\ndesigned to make the labor-intensive industries throw in the
\ntowel and run for the exit.<\/p>\n
On top of that the introduction of regional autonomy has led
\nin some places to a premanisasi of local politics -- that is rule
\nby mafia-style corrupt local officials.<\/p>\n
One of the few people in Indonesia who fully comprehends the
\ndisruptive rise of China is Secretary-General of the Association
\nof Southeast Nations (ASEAN) Rodolfo Severino Jr. He has pushed
\nASEAN into introduction of the Asean Free Trade Area (AFTA) by
\nits six original members. Although a brilliant move, Southeast
\nAsia's weakness in education, questions about the consistency of
\nits policies and the quality of its political leadership continue
\nto be of concern to investors.<\/p>\n
As a result China now dominates the investments flows, while
\nSoutheast Asia receives just a trickle. Twelve years ago it was
\nexactly the opposite.<\/p>\n
It is clear that China's WTO entry has not been a catalyst for
\nreform in Indonesia to meet the China-challenge. Proof to what
\nextent this phenomenon is misunderstood, was the speech delivered
\nby President Megawati Soekarnoputri at the opening of the AFTA
\n2002 Symposium in Jakarta on Jan. 31. Instead of embracing AFTA
\nas the best way to make the Indonesian economy more competitive,
\nthe President spoke about free trade as if were a zero-sum game
\nand why Indonesia should be able to opt out of ASEAN free trade
\narrangements.<\/p>\n
The last one to try this route was Fidel Castro, not really a
\nforward-looking leader.<\/p>\n
To come back to misunderstandings about China that I mentioned
\nin the beginning, yes, there is corruption in China. However,
\nChinese leaders understand their legitimacy depends on rooting
\nout corruption and achieving high economic growth. Proof of this
\nis that none of the top leaders in China is corrupt. Neither are
\ninstitutions like customs and the police.<\/p>\n
A corrupt mayor like those who operate in Indonesia would have
\nbeen arrested, put on trial and executed in China. And that all
\nin one day. The Chinese government likes setting examples. Or as
\nthe Chinese say, \"Kill the chicken to scare the monkeys\".<\/p>\n
True, China's state-owned sector still has a long way to go.
\nIronically that is one of the reasons the Chinese premier Zhu
\nRongji was so eager to join the WTO. Joining this rules-based
\ninternational organization will put additional pressure on China
\nto speed up its reforms.<\/p>\n
True, the Chinese court system is far from perfect, but it too
\nhas come a long way. Foreign investors would not hesitate to
\nstart legal proceedings against a Chinese party. Compare this to
\nIndonesia where foreign investors by definition lose in court
\nbecause they cannot and will not participate an auction.<\/p>\n
Perhaps the ultimate irony is to what extent the economic and
\npolitical crisis in Indonesia has been studied in China. The
\nconclusion in Beijing is that an economy based on crony-
\ncapitalism has to be avoided at all costs. That is a lesson
\nIndonesia hasn't learned yet.<\/p>\n
The reviewer is managing director of PT APCO Indonesia, a
\nwholly owned subsidiary of APCO Worldwide, a Washington D.C.-
\nbased global public affairs (political risk and government
\nrelations) and strategic communications (high-level PR) firm.<\/p>",
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