Govt rejects appeals for AFTA delay

Govt rejects appeals for AFTA delay

Adianto P. Simamora, The Jakarta Post, Jakarta

The government reminded struggling industries here that it
remained committed to lowering more import tariffs next year, as
it rejected the chemical and textile industries' appeals for
exemptions from the ASEAN free trade deal.

The Ministry of Industry and Trade's director general for
regional cooperation, Budi Darmadi, said the government remained
committed to the 1998 Asean Free Trade Agreement (AFTA) it had
signed.

"Like it or not, we have to lower our import tariffs to
between zero and five percent next January in line with AFTA
requirements," Budi told The Jakarta Post on Wednesday.

He said the government had refused to protect the
petrochemical industry for another year from lower trade barriers
under AFTA, which came into effect this year for a number of
products.

It also turned down appeals by the textile industry that it be
given more time to prepare itself against falling trade barriers
next year, Budi added.

Member countries of the Association of South East Asian
Nations (ASEAN) agreed in 1998 to gradually cut import tariff
rates to between zero and five percent.

In effect since the start of this year on a wide range of
products, AFTA aims to expand its product coverage gradually over
the coming years.

The government's determination to commit itself to AFTA comes
against the backdrop of landmark deals for creating free trade
zones binding the ASEAN markets with China, Japan and India.

China led the move by clinching a deal with ASEAN leaders on
Monday to lay the groundwork for the world's largest free trade
zone by 2010. Japan and India jumped on the bandwagon, and signed
similar deals with ASEAN a day later.

Analysts said that the free trade deals, although milestones,
would be unrealizable if AFTA failed to live up to its promise.

Indonesia, like other ASEAN members, has backtracked on
several items which should have been covered by AFTA tariffs.
These involved a total of 66 items this year, including chemical
products.

Budi explained that a flexibility scheme allowed countries to
delay the imposition of AFTA tariffs but added, "we can't easily
delay such agreements. "

He said that backing away from the agreed AFTA terms would
erode investor confidence in this country. Indonesia also had to
pay other countries compensation if it wanted to exempt products
from the AFTA list, he said, but did not elaborate on the
compensation required.

But, the opposition to AFTA has been determined. A number of
business associations have claimed they would not be ready for
import competition if trade barriers were torn down, and warned
that doing so would impact on the local economy.

The Indonesian Textile Association (API), whose industry will
be covered by AFTA starting next January, said it needed at least
another three years to bolster its competitiveness.

The API's head of international relations and foreign trade,
Sunjoto Tanudjaja, said the 1 January deadline was too soon.

Textile producers have been plagued by a slump in global
markets, and rising labor and energy costs.

For now, their products are shielded from overseas competition
by 20 to 30 percent import tariffs.

A surge of smuggled textile products has also exposed many
textile producers to a supply glut at home, and Minister of Trade
and Industry Rini M. Soewandi once sought to raise the import
tariff to 40 percent on garments.

Elsewhere, local chemical players have been urging the
government to defer yet again AFTA's application to their
industry, claiming that many firms were mired in financial
troubles and had difficulties upgrading their technologies to
match those of their competitors.