Electronics industry ready for 2002 ASEAN free market era

Adianto P Simamora, The Jakarta Post, Jakarta

While many local industries claim to remain unprepared for the implementation of the ASEAN (Association of South East Asian Nation) Free Trade Area (AFTA) scheme next year and call for the government's protection, the country's electronics sector welcomes the free market era.

Executives of the country's top electronics companies told The Jakarta Post that the industry, which is dominated by big foreign investors from South Korea and Japan, has long been prepared for the free market era.

"There is no crucial impact of the implementation of AFTA on the electronics sector," Lee Kang Hyun, general manager of PT Samsung Electronic Indonesia, said on Friday.

Under the AFTA program, beginning in 2002, the six oldest members of ASEAN -- Indonesia, Malaysia, Singapore, Brunei, Thailand and the Philippines -- are required to reduce their import duty on most manufacturing and agricultural products to between zero and five percent.

The new ASEAN members, Vietnam, Laos, Cambodia, and Myanmar, are allowed to delay the AFTA implementation until later years.

This means, starting in 2002, manufacturers and farming companies in Malaysia, Singapore, Brunei, Thailand and the Philippines will have greater access to sell their products on the Indonesian market, while the Indonesian producers will have more opportunity to market their products to those countries.

Lee said import duty on electronic products was already below five percent.

"In that sense, we are already prepared for AFTA," he said.

He noted however that the low import duty on electronic products imposed by other ASEAN countries under the AFTA scheme would not benefit electronics companies in Indonesia because many of them had sister companies operating in those countries and they had an agreement not to enter each other's markets.

Thus, the main concern of many local electronics companies during the AFTA era is how to protect their market share in the country amid an influx of new electronic products, Lee said.

Sung Khiun, marketing manager for PT LG Electronics Indonesia said the local producers should offer quality products with competitive prices to compete with the flood of imported products during the AFTA era.

"Consumers will become more selective as a greater variety of electronic products with attractive prices will be available on the market," he told The Post.

The local producers also need to improve efficiency and productivity as well as quality to survive against tighter competition, he said.

Adhi S. Lukman, secretary general of the Indonesian Electronic and Electrical Appliance Industries Association (Indonesia-EEIA), said for now, the main concern of the local electronics industry pertained to the excessive smuggling of electronic products and the government's policy of imposing a luxury tax of between 10 percent and 75 percent on electronic products.

He refused to name the source country of the smuggled products, but industry experts claim that most of the contraband comes from China.

The smuggled electronic products and the luxury tax imposition have really hurt the local electronics companies, making them less competitive on the local market, Adhi said.

Sung shared the view, calling on the government to curb the smuggling and revoke the luxury tax on electronics.

"Please, stop the smuggling and revoke the luxury tax," Sung pleaded.