Tue, 08 Jul 2003

Indonesia aims to establish FTAs with key trading partners

Adianto P Simamora, The Jakarta Post, Jakarta

The government will intensify bilateral talks with Japan, the United States, China, India and Australia this year in an attempt to seek the possibility of entering into free trade agreements with these countries, according to a senior official at the Ministry of Industry and Trade.

Tri Marjoko, director for bilateral cooperation at the ministry, said on Monday that such a move was also aimed at preventing buyers from these five countries from shifting their orders from Indonesia.

"We will focus our efforts more on FTA talks with these five countries to prevent them from shifting orders from Indonesia," he said.

Under the planned free trade mechanism, the country's market would have to be fully opened up to products from the trading partner countries.

Countries involved in FTAs must also slash import tariffs on their products, making their products cheaper.

According to the World Trade Organization (WTO) secretariat, currently there are some 250 FTAs in existence worldwide.

"We must follow the current global trend on free trade so that we'll not be left far behind, especially from our neighboring countries," he said.

Indonesia has so far just entered into an FTA with members of the Association of South East Asian Nations (ASEAN) under its ASEAN Free Trade Area (AFTA) scheme.

ASEAN groups Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, Singapore, Thailand, the Philippines and Vietnam.

A couple of the ASEAN members, however, have already entered into FTAs with countries outside the region.

Singapore, for example, has inked FTAs with the United States, Japan, Australia, New Zealand and Chile. Singapore is also now in formal talks with Canada, China and Mexico for similar agreements.

Thailand is also in talks with India, Japan, Australia, New Zealand, South Africa, Brazil, Croatia, the Czech Republic and Russia.

Tri said that his office would conduct a number of meetings with the five countries this year.

"We will meet with top officials from Japan in August to further discuss the planned FTA between Indonesia and Japan," he said.

The possibility of an FTA deal was reached during the meeting between President Megawati Soekarnoputri and Japanese Prime Minister Junichiro Koizumi in Japan last month.

Japan currently has a free trade agreement with Singapore and is in discussions on similar agreements with the Philippines and Thailand.

Japan is Indonesia's second largest trading partner after the United States with Indonesia's non-oil and gas exports to Japan reaching US$6.3 billion and Indonesia's non-oil and gas imports from that country totaling $4.2 billion last year.

Japan is also the largest foreign investor in Indonesia and the country's largest creditor.

"We hope we will reach a final agreement on the FTA with Japan next year," he said.

With the United States, said Tri, the governments of the two countries had conducted surveys to determine the products to be included in the planned FTA.

The United States is Indonesia's biggest export market, accounting for around 16 percent of its total export sales.