Indonesia to offer to liberalize 7 service subsectors at WTO

Zakki P. Hakim, The Jakarta Post, Jakarta

Indonesia is preparing to liberalize seven of its service subsectors in a bid to improve the country's support services in trade of goods.

According to Minister for Trade, Mari E. Pangestu, the subsectors are going to be offered for negotiation with the WTO, and will include legal services, health services, vocational education, construction, hospitals, business visas and banking.

The "service offers" will be submitted in the coming WTO meeting next month in Geneva.

"Based on our assessment, these seven subsectors are ready to be liberalized. However, we are allowed to revise the list until May," she told reporters after a meeting with state officials from the ministries of health and national education, central bank, and directorate general for immigration late last week.

However, details of legal requirements for the proposed liberalization are still unclear as the related institutions are still in discussions until next month.

Minister of Health, Siti Fadilah Supari, said Indonesia was ready to open access only for hospitals specializing in specific diseases, such as cancer, and they must have a capacity of more than 400 beds.

"We will limit such hospital operations to Jakarta and Surabaya only," she said, adding that the government would compel foreign hospitals to employ a certain percentage of local workers.

Under the WTO, member countries negotiate commitments to services liberalization under a framework of principles called the General Agreement on Tariffs and Services (GATS).

GATS groups services into 12 sectors and recognizes 160 subsectors. The sectors are: business services, communications, construction, distribution, education, environmental sources, health related services, financial services, tourism, transportation, recreation-culture-sports and other services.

In general, Indonesia's policies in services are more advanced than its actual commitment under GATS, thus in future negotiations the government would include more commitments or revised ones.

Mari said the government was preparing to revise its binding commitment to allow foreigners to control 51 percent of a bank's shares from the 49 percent committed at the moment.

In practice, however, the country has let foreigners control stakes in banks of up to 100 percent, she said. Thus, a binding commitment allows the government to protect its banking sector by stipulating that foreigners may only hold a stake of 51 percent.

Liberalizing services -- such as in shipping, finance, banking and telecommunications -- is believed to make the sector far more efficient and leading to a boost in the trade of goods.

The government also believes that Indonesia should accelerate the pace of liberalization in services or risk being behind as investment can easily move to more efficient countries.

Aside from the negotiations for expanding market access in services, WTO member countries are also in talks to set rules that govern the liberalization of the sector.

However, industrialized countries are more interested in pushing for talks to widen market access, leaving negotiations on rules in limbo, claimed the trade ministry's director for multilateral cooperation, Djunari Inggih Waskito.

Negotiations on rules would cover such matters as emergency safeguard measures (ESM), subsidies, domestic regulations, services assessment method and government procurement.

Indonesia in particular was pushing to establish ESM, which was necessary to control the inflow of services if a surge occurred that could threaten or damage the local industry.

"We have been pushing the issue of establishing ESM for the last seven years, only to face constant prevarication from the developed world," Djunari said.