FTA to benefit RI more than China: Official

Adianto P. Simamora, The Jakarta Post, Jakarta

The government is confident that the newly established free trade agreement (FTA) between China and ASEAN countries will benefit Indonesia more than China as it would enable the country to boost its exports, especially agricultural and fish products, in the Chinese market.

Budi Darmadi, the director of regional cooperation at the Ministry of Industry and Trade, predicted that the country could raise some US$110 million in revenue from the export of agricultural and fish products to China next year when the agreement is scheduled to come into effect.

"We are confident that our products will be able to compete in Chinese markets, especially fish products. We are very strong in the fisheries sector," Budi told The Jakarta Post over the weekend.

"The agreement will give us (Indonesia) chances to export more products to China in the future," he added.

Budi added that the country's total imports from China might only reach some $80 million a year during the first years of the agreement's implementation.

China and Southeast Asian governments signed last Monday an historic agreement to create the world's largest FTA, embracing 1.7 billion people and trade worth $1.2 trillion.

Under the agreement, both parties, China and ASEAN countries, agreed to first carry out an "early harvest package" over three years.

During this period, each country will also start cutting import tariffs on selected products to between zero percent and five percent.

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

The FTA is expected to be complete in 2010 between China and the six original ASEAN members of Indonesia, Brunei, Malaysia, the Philippines, Singapore and Thailand.

Meanwhile, for the less developed ASEAN nations of Cambodia, Laos, Myanmar and Vietnam, the completion of the FTA was pushed back until 2015.

China's exports to Indonesia are so far mainly machinery and equipment, electrical appliances and electronic devices, textiles and motorcycles.

Meanwhile, Indonesia's exports to China are mainly crude oil, palm oil, paper, pulp and timber.

Data from the People's Republic of China's Ministry of Trade and Economic Cooperation showed that Indonesia's exports to China in 2001 totaled $3.88 billion, while Indonesia's imports from China totaled $2.83 billion.

Trade between ASEAN countries and China registered a record high in 2001, totaling $41.62 billion.

Budi, however, declined to provide details of the agricultural products to be included in the early harvest package.

"We shall include some fish and agricultural products in the early harvest package, but we will certainly continue to protect sensitive products, such as sugar and rice," Budi said.

Budi emphasized that the country would propose under the early harvest package that China export to Indonesia products which cannot be planted here, such as pears.

Experts earlier questioned the benefits of the FTA for Indonesia, considering that many Indonesian products had become increasingly less competitive over the past year.

They said that the FTA could boomerang on domestic markets as more cheaper products, mainly from China, would flood local markets.

H.S. Dillon, the head of the Center for Agricultural Policy Studies, said that the FTA would pose a serious threat to local farmers as they would not be able to compete against cheaper products from China.

Worse still, said Dillon, it would be extremely difficult for local agricultural products to enter the Chinese market given their higher prices and the fact that the market is already glutted.

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

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