Indonesia backtracks on AFTA scheme
By Riyadi
KUALA LUMPUR (JP): Indonesia has again backtracked on a free trade process in the region by withdrawing five chemical products from its earlier liberalization commitment.
Nevertheless, Indonesia agreed at a meeting of trade ministers from the Association of Southeast Asian Nations (ASEAN) here yesterday that it would return the five products starting in 2000.
Indonesian Minister of Industry and Trade Tunky Ariwibowo confirmed that Indonesia had taken the five chemical products off the inclusion list under the Common Effective Preferential Tariff (CEPT) scheme, the main instrument designed to materialize the ASEAN Free Trade Area (AFTA) by 2003.
"Yes, we managed to remove them ... and there shouldn't be any problem," Tunky said after attending the meeting of trade ministers.
The five chemical products are ethylene, propylene, polyethylene, polypropylene and sterine.
Products on the inclusion list must have a maximum import tariff of 20 percent, which then must be brought down to 5 percent or less by 2003 for six ASEAN members -- Brunei, Indonesia, Malaysia, the Philippines, Singapore and Thailand -- by 2006 for Vietnam and by 2008 for Laos and Myanmar.
Initially, all five chemical products were included on the list as their tariffs ranged from 5 percent for ethylene and propylene to 20 percent for polyethylene and polypropylene.
Then in early 1996, the government introduced a surcharge of 20 percent to four of the products, which was then made into a permanent tariff in mid-1996.
And earlier this year, an informed source said the government -- through Ministry of Finance decree No. 151 -- announced a new schedule of tariff reduction for those products, which was not in-line with the CEPT scheme.
"But we agreed at today's meeting to put back those five products onto the inclusion list starting in 2000," the source said.
Sensitive list
Last year, Indonesia managed to push back by 10 years a 2010 deadline for integrating rice and sugar into the ASEAN free-trade agenda by shifting those products from a sensitive list to a newly-created "highly sensitive" list.
And in 1995, Indonesia transferred several unprocessed agriculture products from the temporary exclusion list to the sensitive list.
Director General of Foreign Trade Djoko Moeljono argued that Indonesia needed to protect its petrochemical industries because they were still in their infancy.
"Unlike neighboring countries, our petrochemical industries are not yet integrated from upstream to downstream, which makes production costs higher. That's the reason why we need to protect them," Djoko said.
Malaysia had been adamant about opposing Indonesia's move. It even challenged to bring Indonesia to the World Trade Organization's dispute settlement body if Indonesia failed to observe its free-trade commitment.
To prevent further backtracking on the AFTA process, Malaysia, supported by other members, proposed to adopt a "notification procedure" into the CEPT scheme.
The notification procedure would require ASEAN countries to inform each other 60 days in advance of any modification to their commitments under the AFTA agreement.
Malaysian Minister of International Trade and Industry Rafidah Aziz said the CEPT agreement did not include any notification requirement.