Indonesia backtracks on AFTA scheme

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.