Experts say local industries not yet ready for AFTA<\/p>\n
Adianto P. Simamora, The Jakarta Post, Jakarta<\/p>\n
The full implementation of the ASEAN free trade area (AFTA) on
\nJan. 1, 2003 will further hurt already weak local industries as
\nthey remain unprepared to face open competition, experts warn,
\nblaming Indonesia's worsening investment climate.<\/p>\n
\"Frankly speaking, we are not yet ready to face competition
\nnext year, mainly due to the unfavorable investment climate
\nhere,\" Soy Pardede, a senior official at the Indonesia Chamber of
\nCommerce and Industry (Kadin) told The Jakarta Post on Sunday.<\/p>\n
The five other Association of Southeast Asian Nation (ASEAN)
\nmember countries to slash import tariffs on almost all products
\nunder the AFTA scheme early next year are Brunei, Malaysia,
\nSingapore, the Philippines and Thailand.<\/p>\n
Soy said the unfavorable investment climate had hindered local
\nindustries from improving their competitiveness and efficiency,
\nthus making their products more expensive than that of their
\nregional competitors.<\/p>\n
\"Poor competitiveness is our main problem now,\" Soy said.<\/p>\n
He said the government's aggressive tax policy, by imposing
\nvarious taxes such as the value-added tax and luxury tax on
\nlocal-made products, had made local products more expensive.<\/p>\n
Other long-term problems faced by local industries here
\nincluded labor conflicts, security concerns, a weak legal system
\nand poor implementation of the regional autonomy policy, he said.<\/p>\n
Sri Adiningsih, an economist at Gadjah Mada University, shared
\nSoy's opinion, saying the problems had made local industries
\nunready to compete against cheaper imported products from other
\ncountries.<\/p>\n
\"The competition will be very tight as most ASEAN countries
\nproduce similar products. Unfortunately, we are in a difficult
\nposition now,\" Sri said.<\/p>\n
By slashing import tariffs, Sri said cheaper products from
\nneighboring countries would further penetrate the domestic
\nmarket.<\/p>\n
Sri urged the government to step up efforts to help boost the
\ncompetitiveness of local products.<\/p>\n
AFTA was agreed upon in 1993, with the implementation of the
\nfree trade scheme initially scheduled for 2008. The timeframe was
\nlater accelerated to 2003.<\/p>\n
But ASEAN ministers agreed in 1998 to bring the second
\ndeadline forward and started cutting import tariffs on many
\nproducts in January this year.<\/p>\n
Under AFTA, the six founding members of ASEAN will reduce
\nimport tariffs on all products in the inclusion list to between 0
\npercent and 5 percent next year.<\/p>\n
The four other ASEAN members -- Vietnam, Laos, Cambodia and
\nMyanmar -- are to be allowed to delay their tariff reductions
\nuntil between 2006 and 2010.<\/p>\n
The inclusion list is the list of products that all ASEAN
\nmembers have agreed to be included in the tariff reduction
\nprogram in the first year of AFTA.<\/p>\n
Indonesia registered 7,206 items in the inclusion list.<\/p>\n
Import tariffs on 7,137 items have been set at between 0
\npercent and 5 percent since January 2002, while the tariffs on
\nthe remaining 69 products, mostly chemicals and plastics, are
\nstill above 5 percent.<\/p>\n
ASEAN agreed to allow its members to delay imposing lower
\nimport tariffs on several products until 2003 under its
\nflexibility scheme.<\/p>\n
Indonesia proposed delaying the inclusion of the 69 items in
\nthe hopes the related industries could improve competitiveness.<\/p>\n
Aside from the inclusion list, there is also the sensitive
\nlist, containing products considered \"sensitive\", including rice
\nand sugar, for which ASEAN members have agreed to delay tariffs
\nuntil after 2010.<\/p>\n
The government has repeatedly said that AFTA would bring
\nbenefits rather than losses to the country's industries as the
\ncountry could boost its exports to other ASEAN countries.<\/p>\n
The government is determined to slash import tariffs on all
\nproducts to between 0 percent and 5 percent next year in line
\nwith AFTA requirement.<\/p>",
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