FOR AFTA SUPPLEMENT Jan 31---

FOR AFTA SUPPLEMENT Jan 31---
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AFTA-trade-speakup

JP/ /

It offers golden opportunity, but ...

The Jakarta Post

Many of Asia's protected industries are way beyond the infant
stage, when they arguably needed special nurturing. Yet some
still cling to protectionist tariffs like an overgrown child to a
security blanket. Take the latest grumbling about the ASEAN Free
Trade Area (AFTA), which aims to liberalize trade in the 10-
nation grouping. Despite a recent agreement by ASEAN economic
ministers to extend the schedule to 2002 from the original target
of 2008, threats of delays lurk. Businessmen and government
officials have generally agreed on the importance of developing
ASEAN as a common market and single production base for member
countries. However, they disagreed on when the trade pact should
be fully realized. Below are some of their comments related to
the free trade agreement.

Aburizal Bakrie, chairman of the Indonesian Chamber of
Commerce: Indonesia needs to pull back from AFTA because the
current domestic economic situation isn't yet conducive to such a
move.

It is not the right moment to fully implement free trade
liberalization in the region this year, although the region's
economy needs AFTA to benefit from the rising business
opportunities in the region.

The unified ASEAN market will, in fact, create opportunities
to increase exports and to attract foreign investment. With lower
labor costs, Indonesian exporters are in the best position to
take advantage of relaxed tariffs in the region. And the threat
of damage to local business is actually limited. Only 15 percent
of Indonesia's imports come from ASEAN countries, representing
about 2 percent of GDP. It is only a matter of time. Indonesia is
not yet ready. Four business sectors, automotive, chemical,
retail and food industries, for example, could lose from the free
trade agreement.

For that reason, the government should be more flexible, by at
least placing the four business sectors on the so called
Temporary Exclusion List.

As Indonesia is still in a difficult situation, it should be
given more time to enter the free trade agreement.

Rini Soewandi, Minister of Industry and Trade: Although not
all Indonesian business sectors are ready to fully implement the
free trade agreement, adopting the free trade agreement is not
really a problem for some sectors.

The trade pact has been implemented since 1992 by a gradual
reduction of import tariffs of respective member countries. It
has also become a common commitment between business players and
the government to stick to the trade agreement. Due to the
economic crisis, many industries have called on the government to
delay the full implementation of the free trade commitment until
they fully recover. It is understandable then if some companies
are worried. But from my observation, many industries are ready
to implement the free trade deal. Of course, some industries
might lose and there are also others that will win.

The fact that some ASEAN countries have imposed non-trade
barriers to protect their goods despite their full commitment to
the trade pact is normal. It is common -- even the European
Community imposes, for example, a non-tariff barrier on
Indonesian goods. The most important thing is that we have to
find the solution.

Indonesia's non-oil exports to other members of ASEAN are
still relatively small, indicating that Indonesian companies have
yet to pay serious attention to increasing their trade in the
region. The regional market is still relatively untapped by
Indonesian companies.

Indonesia has no choice but to adopt the pact; if not, it will
be left behind by other ASEAN member countries. Indonesian
companies should, therefore, be aware of the need to improve the
quality of their products and to promote their efficiency. If
not, Indonesia will be flooded by goods from other ASEAN members,
rather than getting a bigger slice of the expanded market.

Martha Tillar, the founder and chairperson of cosmetics
producer Martha Tillar Group: The free trade accord offers a
golden opportunity for companies in the region to raise their
exports in the expanded market.

With the free trade agreement, ASEAN will become a single
market for the region's companies. We no longer talk of
Indonesia's 210 million people, but the whole region's
population.

There is no exception. All the business players in the region
should prepare themselves if they want to benefit from the
expanded market. However, in order to take advantage of the wider
business opportunities, every single company in the region should
be able to offer products with superior quality. Otherwise, the
trade agreement will only create a nightmare for them.
Erwin Elias, a member of the council for the development of
small-scale export-oriented companies (UKM): As long as there is
no market distortion, Indonesian small-scale exporters will find
the free trade agreement to be an opportunity to expand their
foreign markets, particularly in ASEAN.

A market distortion, such as unofficial levies, has become a
classic problem for Indonesian companies in competing with
foreign producers. Such market distortions have eliminated the
competitive edge of local products. In addition to the market
distortions, financial institutions such as banks still lack a
commitment to providing credits to small-scale companies. The
banks' requirement that Jakarta-based assets be provided as the
collateral to obtain loans is an example of the banks' half-
hearted treatment of small companies.

Achmad Saifun, the chairman of the federation of car parts
producers (GIAM): The issue related to the AFTA is not new at
all. It was approved by member countries a long time ago. ASEAN
member countries have also agreed to speed up the process of
reducing import tariffs within the region to 0-5 percent this
year, instead of 2008 as originally agreed. This is a long term
process, which should have been followed by all business players
in the region. For Indonesian auto-related companies, the free
trade agreement adopted by the 10 ASEAN nations should be
regarded as a light exercise before entering a wider scope of
free trade agreements such as those implemented under the World
Trade Organization (WTO).

In the case of AFTA, Indonesian companies are given the
opportunity to compete with rivals of the same class before being
engaged in a real fight on the global free trade market.

Lily Yuliani, a wood handicrafts producer: Small companies,
which are mostly located outside Jakarta, have become easy prey
for corrupt government officials. How could they compete with
foreign producers if they have to pay various kinds of payments
to almost all government institutions. It is really burdensome
because the money spent on such payments is quite large. To
obtain a license, for example, we have to pass through all levels
of government agencies from the head of the village to those at
the regency and provincial levels, and sometimes we have to go to
Jakarta. It costs a lot of money for small firms, which mostly
receive a slim margin from their export activities.