China-ASEAN free trade a threat to RI: Experts

China-ASEAN free trade a threat to RI: Experts

Adianto P. Simamora, The Jakarta Post, Jakarta

With Indonesia's industries unprepared to face open
competition, the Free Trade Area (FTA) signed on Monday by China
and the Association of Southeast Asian Nations (ASEAN) will do
more harm than good to local industries, experts warned on
Wednesday.

H.S. Dillon, head of the Center for Agricultural Policy
Studies, said local industries were unprepared for the
competition due to inefficiency and government policies that
spoiled them rather than making them strong.

Once the FTA takes effect, Chinese products will flood the
local market, Dillon warned.

"I am afraid that more cheaper agricultural products from
China, such as fruits, will enter and control our local markets,"
he said.

According to Dillon, it will be extremely difficult for local
farm products to enter the Chinese market given their higher
prices and the fact that the market is already oversupplied.

With Indonesia unable to back out of the FTA deal, Dillon
urged the government to begin improving the competitiveness of
local farmers, including increasing their productivity.

Rizal Ramli, former coordinating minister for the economy,
said the FTA would pave the way for China to increase its exports
to ASEAN countries, but a significant flow of goods in the other
direction was unlikely.

"In other words, Indonesia and ASEAN will increase the size of
China's export market over the coming decade, while the potential
benefits to ASEAN countries will remain fairly limited. The
reason is that China-ASEAN trade relations are fundamentally
competitive rather than complementary," Rizal said.

According to the former minister, Indonesian exports to China
are limited to energy and other primary products such as crude
palm oil.

Chinese-made products popular among Indonesians include
electronic goods, household appliances, textiles, footwear and
motorcycles.

China and ASEAN signed an historic agreement on Monday to
create the world's biggest FTA, embracing 1.7 billion people and
trade worth US$1.2 trillion.

The FTA is expected to be in place in 2010 between China and
the six original ASEAN member state: Brunei, Malaysia, Indonesia,
the Philippines, Singapore and Thailand. For the less developed
ASEAN nations of Cambodia, Laos, Myanmar and Vietnam, the FTA was
pushed back until 2015.

Under the agreement, tariff cuts on selected farm products
under an "early harvest package" will start as early as next
year.

The products covered under the early harvest package include
live animals, meat, fish, dairy products, other animal products,
live trees, vegetables, fruit and nuts.

According to data from the People's Republic of China's
Ministry of Trade and Economic Cooperation, Indonesia's exports
to China in 2001 totaled $3.88 billion, while its imports from
the country totaled $2.83 billion. Bilateral ASEAN-China trade
totaled $41.6 billion last year.

Pande Raja Silalahi, an economist from the Centre for
Strategic and International Studies, said the FTA could boost
trade between Indonesia and China, but the government should help
local businesses penetrate the market.

"Many local business players don't understood the
characteristics of China's markets and their demands, so the
government must help them study the markets," he said.

He also urged the government to protect sensitive products,
such as sugar and rice.

Meanwhile, Derom Bangun, the chairman of the Indonesian Palm
Oil Producers' Association, hailed the FTA, saying that would
enable Indonesia to export more crude palm oil (CPO) products to
China.

Indonesia, the world's second largest palm oil producer after
Malaysia, has set a target of producing 7.2 million tons of CPO
this year, up from 6.5 million tons in 2001.