Govt told to broach FTA with Japan

Adianto P. Simamora, The Jakarta Post, Jakarta

Economic experts say that the Indonesian government must take advantage of Japanese Prime Minister Junichiro Koizumi's visit here to pursue the establishment of a bilateral free trade agreement (FTA) with the world's second largest economy.

"This is the right moment for the government to discuss a bilateral free trade agreement with Japan," Sri Adiningsih, a professor at Gadjah Mada University, told The Jakarta Post on Saturday.

Her comments came after two of the six founding members of the Association of Southeast Asian Nations (ASEAN) -- Singapore and Thailand -- agreed to each build up a bilateral FTA with Japan.

In October, Japan and Singapore completed negotiations to launch their bilateral free trade accord.

On Friday, Koizumi, on his five-nation tour in the region, also said that he agreed in principle with his Thai counterpart, Thaksin Shinawatra, to set up an FTA between their countries within the year.

Koizumi arrive in Jakarta on Saturday. Japan is Indonesia's second export destination after the United States.

"We will suffer many losses if the government fails to take this opportunity to discuss the FTA," Sri said. "The FTA scheme is not a bad thing, because each ASEAN country must also prioritize its own national interests."

She added that Thailand would use the bilateral agreement to increase agricultural exports to Japan with low import tariffs.

Japanese farmers are currently still protected by their government from cheap agricultural imports.

"It will also be easier to invite more investment from Japan (in Indonesia) if there is a bilateral FTA," Sri said.

Meanwhile, Soy Pardede, a senior official at the Indonesian Chamber of Commerce and Industry (Kadin), voiced fear that the establishment of a FTA with Japan would threaten the ASEAN Free Trade Area, popularly known as AFTA.

"In terms of ASEAN context, this is not the right moment to set up FTA with Japan," Soy said.

But he admitted that the government might be forced to discuss the possibility of setting up FTA with Japan so as not to be left behind Singapore and Thailand.

Leaders from the six founding ASEAN nations agreed to set up AFTA in 1993, with the implementation of the free trade scheme initially scheduled for 2008 but later moved up to 2002.

Under the AFTA scheme, almost all products traded in the six founding ASEAN countries members now have import tariffs of between zero percent and 5 percent

Analysts have said that Koizumi's trips to five ASEAN nations would be used to boost Japan's profile in the region to counter China's intensified dialog with ASEAN members.