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.