Ever since the ASEAN-China Free Trade Agreement was implemented, concerns have risen over the readiness of Indonesia’s industries to compete with China’s labor and products.
Most industries were worried that, without protective measures, their goods would be replaced in the Indonesian market by less expensive goods from China.
Some of these industries, especially from the textile sector, also voiced their concerns over the overarching impacts of the FTA - joblessness, deindustrialization, and increasingly difficult measures to export their goods to China.
Without clear guidelines as to what the FTA entails and its impact on Indonesian industries, it is no wonder that the general public and the industries are nervous about the FTA.
On the other hand, the government has tried to communicate to the public the positive aspects of the FTA: greater competitiveness among Indonesian industries, which, in turn, will spur the increased quality of Indonesian products.
There is also the obvious benefit of ASEAN-China free trade zone being the third biggest in the world by volume after the European economic area and the North American free trade area.
It includes 1.9 billion people - a tremendous market which opens up trade opportunities for all ASEAN countries and China.
While Surin Pitsuwan, ASEAN’s secretary-general, insists that the governments are not going to delay implementation of the ASEAN-China FTA, an article in The Jakarta Post on Jan. 14, 2010 reports that a spokesman for the Ministry of Industry, Muhdori, confirmed that the Ministry had submitted a letter to the Coordinating Economic Minister, Hatta Rajasa, on Dec. 20, 2009, to request scheduled tariff reductions on 146 product lines be delayed by one year.
The letter also asked for scheduled tariff reductions for a further 60 items to be delayed by two years and for 22 items to be delayed until 2018. A final decision on whether Indonesia would forward those requests to ASEAN rested with Rajasa, who has not responded to the letter.
Should such a postponement be enacted?
In a discussion on Jan. 12, 2010 that included members of the Trade and Economic Ministries, the Indonesian Chamber of Commerce’s (Kadin) ASEAN, Asia-Pacific and China committees, as well as representatives from various business communities, it was mentioned that Indonesia’s stellar economic performance in recent years, as well as its resilience in the face of the global economic downturn in 2008, are all factors that have caused other members of ASEAN to look toward Indonesia as a leading ASEAN nation, even though its level of competitiveness is still behind Singapore, Malaysia and Thailand.
Therefore, Indonesia is deemed ready for the ASEAN-China FTA.
In other words, the Indonesian government should rethink its move carefully before proposing a renegotiation and/or postponement.
The impact of the FTA, of course, will affect the Indonesian business sector. A detailed survey to elicit the demands and concerns of the business sector (e.g., distributed via associations) should have been distributed, compiled and analyzed during the time when the FTA was being negotiated.
Intensive research on other bilateral and multilateral FTAs that Indonesia and other countries have entered into must also be conducted.
The results could then inform policy makers and bureaucrats in the government on how they could present Indonesia’s case in the ASEAN-China FTA.
Recognizing the importance of rigorous research and data collection is a significant lesson for our government to make future policy decisions on bilateral and multilateral trade agreements.
At the moment, however, it is imperative to look ahead, on the steps that Indonesia must take, as the ASEAN-China FTA has already been enacted.
If renegotiation is not carried out, then the government should seriously think about an incentive program to boost the productivity and competitiveness of the various industries in Indonesia.
The government should also pool any concerns and/or complaints from the various industries and respond by giving succinct but clear guidelines on what, exactly, the FTA entails.
The mass media would be an excellent outlet for such an announcement. A hotline number and/or email address should also be provided for the business sector to reach the government.
After all, as Kadin’s president and Minister of Industry MS Hidayat stressed, during the opening address of the national congress of Kadin’s leaders (held at the end of 2009), in order to strengthen both domestic and international economies, it is crucial to first establish a cooperative relationship between the government and business sectors.
An effective communication channel must thus be maintained to ensure a smooth flow of information between the two sectors to reduce any kinds of uncertainties and misunderstandings.
Both the government and business sectors must also remember that the FTA was signed by all ASEAN countries with China.
It is not a bilateral FTA which only involves Indonesia and China. For Indonesia to progress, it must improve its own level of competitiveness and adapt to regional integration.
The writer is vice chairwoman of Kadin’s International Committee on Economic Cooperation for Asia Pacific. She holds a PhD in communications from New York University and lectures at the University of Indonesia’s Department of Communication.
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