ASEAN-China trade has silver lining, minister says

ASEAN-China trade has silver lining, minister says

Zakki P. Hakim, The Jakarta Post, Jakarta

Local industries here are anxious about anticipating in the
launch of the biggest free trade area between the Southeast Asian
grouping and China, but the government has given its assurance
that it would be beneficial for the country.

Minister of Trade Mari E. Pangestu acknowledged that the
cheaper Chinese products were posing a threat to local producers,
especially the small and medium enterprises (SMEs).

"Therefore the government will assist SMEs, through
partnership programs, capacity building and providing
microcredit, in preparation for the free trade area," she told
The Jakarta Post.

Moreover, she said that the government realized that
Indonesia's competitiveness would depend heavily on its effort to
curb rampant corruption and red tape, relax the rigid labor law,
improve tax rates and administration, guarantee legal certainty
and work on the country's ailing infrastructure.

Nevertheless, as the bulk of all goods traded would have their
import duties gradually reduced to zero by 2010, the country's
manufacturers still have time, albeit limited, to anticipate the
full impact of ASEAN-China free trade area, she said.

She went on to say that China was strong, particularly because
its manufacturers run in high economies of scale, therefore local
producers should not compete in a head-on fashion.

According to the minister, the cost of labor in the countries
was actually on a par, but Chinese workers were more productive.
"We must not compete in the low-end consumer goods. We have to
produce higher quality goods aiming at the medium-high segment,"
she said.

She said also that the country could and must develop its
competitiveness, especially because Indonesia had a rich variety
of abundant natural resources that China did not have.

Time might be up for China in enjoying efficiency from tapping
state-of-art technology by dominating the world's foreign direct
investments, as multinational firms had come to believe that it
was too risky to put all their eggs in China alone.

"They will not rely on just one source. They will diversify
their investments, including (placing them in) Indonesia. We have
competitive labor, natural resources and don't forget our big
market," she said.

The Indonesian Chamber of Commerce and Industry (Kadin)'s
product development and marketing committee head Thomas Darmawan
said that China was far more ready than Indonesia in embracing
ASEAN-China FTA.

"They have new factories, built in integrated areas, producing
low-end products ready to penetrate the ASEAN market," Thomas
told the Post.

Certain industries would surely fall victim to the trade
liberalization drive, although there are areas in which the local
private sector could actually benefit from in the agreement
through several ways, he said.

The country has to lobby and convince Chinese producers to use
semi-processed Indonesian goods, and then keep informing them of
the standards and demands of local consumers to ensure efficient
trade, he said.

Indonesia has to be ready to facilitate Chinese manufacturers
to expand production here.

"In order to do so, Indonesia must have a lobby team in China
that moves to convince Chinese industry players. Thailand,
Malaysia and Singapore have had such teams for years," said
Thomas, who is also the chairman of the Indonesian Food and
Beverages Association (GAPMMI).

Anton Supit, a top executive at the Indonesian Employers
Association (Apindo) said that the 2010 liberalization schedule
should provide more than enough time, but only if the government
succeeded in waking up the local private sector.

"We have to admit the organization of local industry players
is weak. Therefore, we cannot entirely blame the government if we
are not ready to enter the trade liberalization era," he told the
Post.