China and the WTO: Teaching RI some lessons
China and the WTO: Teaching RI some lessons
Hans W. Vriens, Contributor, Jakarta
China and the WTO, Changing China, Changing World Trade
By Supachai Panitchpakdi and Mark L. Clifford
John Wiley & Sons (Asia) Pte Ltd, 2002
US$21.95
Since I moved from Hong Kong to Jakarta two years ago I have been
struck by the extent to which developments in China are
misunderstood in Indonesia.
Even respected analysts in Jakarta regularly ventilate ill-
formed opinions like, "China is much more corrupt than Indonesia"
or "China's economy is a mess similar to Indonesia's. As a result
Beijing will never succeed in reforming its state-owned
companies", and finally, "the court-system in China is just as
corrupt as in Indonesia".
I would advise all those analysts to pack their bags and spend
a few months in China or, second-best, read this recently
published book. Written by Dr. Supachai Panitchpakdi, the
incoming director-general of the World Trade Organization (WTO)
and Mark L. Clifford, the Hong Kong-based Asia Editor for
BusinessWeek, it is a must read for anybody who cares about the
economic future of Indonesia.
For the rest of Asia, and Indonesia in particular, China's
economic rise and its accession to the WTO should be a resounding
wake-up call. To put it in perspective: No country in history has
burst onto the world trading stage like China. It was less than a
quarter-century ago, in December 1978 to be precise, that China's
leaders first adopted their initial economic reform program of
what was then a state-control-led economy.
Rising powers are inevitably disruptive to the existing order.
China's rise to become an economic powerhouse promises to be very
disruptive for Southeast Asia and Indonesia in particular.
A bellwether event for Indonesia will be the elimination of
quotas on garments and textiles (the Agreement on Textiles and
Clothing) at the end of 2004. A highly productive army of Chinese
will be producing even more goods, more cheaply than ever before.
World Bank studies show that Chinese apparel production is
expected to nearly quadruple in the coming decade. The export
numbers look even more staggering.
Its share of the total world export market will surge to more
than 47 percent compared with 15 percent in 1997. In others
words, nearly half of all exported clothing will be made in China
in 10 years time. One will find the same kind of scary statistics
in other sectors such as computers and electronics. Most toys are
already produced in China.
One wonders what Indonesia's strategic plan is to deal with
this potential onslaught on its labor-intensive industries like
apparel and footwear. One wonders.
I have seen no proof that Indonesian policymakers are acting
on what looks like a ticking economic time bomb. Rather the
opposite. A 39 percent rise in the minimum wage and policies that
make it very difficult and expensive to lay off staff seem
designed to make the labor-intensive industries throw in the
towel and run for the exit.
On top of that the introduction of regional autonomy has led
in some places to a premanisasi of local politics -- that is rule
by mafia-style corrupt local officials.
One of the few people in Indonesia who fully comprehends the
disruptive rise of China is Secretary-General of the Association
of Southeast Nations (ASEAN) Rodolfo Severino Jr. He has pushed
ASEAN into introduction of the Asean Free Trade Area (AFTA) by
its six original members. Although a brilliant move, Southeast
Asia's weakness in education, questions about the consistency of
its policies and the quality of its political leadership continue
to be of concern to investors.
As a result China now dominates the investments flows, while
Southeast Asia receives just a trickle. Twelve years ago it was
exactly the opposite.
It is clear that China's WTO entry has not been a catalyst for
reform in Indonesia to meet the China-challenge. Proof to what
extent this phenomenon is misunderstood, was the speech delivered
by President Megawati Soekarnoputri at the opening of the AFTA
2002 Symposium in Jakarta on Jan. 31. Instead of embracing AFTA
as the best way to make the Indonesian economy more competitive,
the President spoke about free trade as if were a zero-sum game
and why Indonesia should be able to opt out of ASEAN free trade
arrangements.
The last one to try this route was Fidel Castro, not really a
forward-looking leader.
To come back to misunderstandings about China that I mentioned
in the beginning, yes, there is corruption in China. However,
Chinese leaders understand their legitimacy depends on rooting
out corruption and achieving high economic growth. Proof of this
is that none of the top leaders in China is corrupt. Neither are
institutions like customs and the police.
A corrupt mayor like those who operate in Indonesia would have
been arrested, put on trial and executed in China. And that all
in one day. The Chinese government likes setting examples. Or as
the Chinese say, "Kill the chicken to scare the monkeys".
True, China's state-owned sector still has a long way to go.
Ironically that is one of the reasons the Chinese premier Zhu
Rongji was so eager to join the WTO. Joining this rules-based
international organization will put additional pressure on China
to speed up its reforms.
True, the Chinese court system is far from perfect, but it too
has come a long way. Foreign investors would not hesitate to
start legal proceedings against a Chinese party. Compare this to
Indonesia where foreign investors by definition lose in court
because they cannot and will not participate an auction.
Perhaps the ultimate irony is to what extent the economic and
political crisis in Indonesia has been studied in China. The
conclusion in Beijing is that an economy based on crony-
capitalism has to be avoided at all costs. That is a lesson
Indonesia hasn't learned yet.
The reviewer is managing director of PT APCO Indonesia, a
wholly owned subsidiary of APCO Worldwide, a Washington D.C.-
based global public affairs (political risk and government
relations) and strategic communications (high-level PR) firm.