Govt, businesses told to boost efficiency ahead of world's largest FTA
Adianto P.Simamora, The Jakarta Post, Jakarta
Experts warned both the government and the country's business sector to boost efficiency in anticipation of the planned world's most populated regional free trade area (FTA) or else risk losing competition, particularly from China.
Cutting red tape should be a high priority, economists said.
"It will be difficult for Indonesian businesses to compete with Chinese firms if they remain unprepared," said University of Gadjah Mada economist Sri Adiningsih.
Chinese Premier Zhu Rongji and Southeast Asian leaders, including President Megawati Soekarnoputri, agreed at this week's ASEAN summit in Brunei Darussalam to establish a regional free trade area comprising rapidly growing China and resource-rich Southeast Asia within a 10-year period.
It will be the world's largest FTA in terms of population, with about 1.8 billion people and the third largest in terms of gross domestic product (GDP) after the North American and European FTAs.
Sri said that without immediate action to address inefficiency in the country's economy and business sector, the planned FTA would only open up the domestic economy to cheaper products made in China, which would flood the domestic market and threaten the survival of local industries.
She added that many businesses were not even ready to face the looming Asean Free Trade Area (AFTA), which will start in 2002.
Economist Bustanul Arifin of the private think tank, Institute for Development of Economics and Finance (Indef), concurred.
"Local businesses should work flat out to improve their competitiveness," he said, adding that the upcoming AFTA could be used as an exercise ground to win competition in the greater arena.
Under AFTA, the six founding members of ASEAN - Indonesia, Singapore, Malaysia, Thailand, Brunei Darussalam, the Philippines - would lower import duties on several products to between zero and five percent.
The new ASEAN member countries of Vietnam, Laos, Cambodia and Myanmar will be allowed to delay the opening up of their markets until between 2006 and 2010.
Bustanul also said that local businesses should strengthen their market intelligence so as to determine China's market demand.
"I think...China will use this opportunity to explore more new markets in ASEAN," he said, adding that Chinese businessmen had already established strong business links in the region.
Mohamad Ikhsan, economist at the University of Indonesia voiced optimism that the free trade area would mutually benefit both ASEAN and China.
"This is a good opportunity for Indonesia because China is now ready to open up its profitable market," Ikhsan said.
He said China, with its big population but insufficient resources, would be a new potential export market for Indonesia because there was a huge demand for natural resources in China.
According to Chinese officials, the trade between Indonesia and China totaled US$7.5 billion in the year 2000.
China imports mainly crude oil, palm oil and timber from Indonesia while exporting mainly electronic appliances and motorcycles to Indonesia.