Local industries should be prepared for FTA: Experts

Local industries should be prepared for FTA: Experts

Adianto P. Simamora, The Jakarta Post, Jakarta

Experts called on the government on Friday to take measures to
help boost the competitiveness of local industries before going
ahead with its plan to sign a free trade agreement (FTA) with the
United States.

Sri Adiningsih, an economist at Gadjah Mada University in
Yogyakarta, said an FTA with the U.S. would not benefit local
industries very much as most of them were not ready to compete in
trade, citing that many local products had not only failed to
compete on foreign markets, but also on local markets.

Sri acknowledged that bilateral FTAs had become a trend, but
said Indonesia did not need to follow the trend.

"It would be better for the government to boost the
competitiveness of local industries than just follow the trend to
create an FTA," Sri told The Jakarta Post on Friday.

"Freeing up the market is a very sensitive issue. The
government should first ask many parties, including business
players, whether the country is ready for free competition," she
added.

Minister of Industry and Trade Rini M. Soewandi and U.S. Trade
Representative Robert Zoellick were in Bali on Thursday to
discuss the likelihood of an FTA.

The U.S. is seeking bilateral deals with each of the
Association of Southeast Asian Nations (ASEAN) members rather
than regional cooperation as a whole.

The U.S. is Indonesia's biggest export market, accounting for
around 16 percent of total export sales.

Indonesia's main exports to the U.S. are garments, textiles,
footwear and shellfish. While the country's imports consist
mainly of agricultural products like cotton, wheat and maize.

American agricultural products remain tightly protected by
both taxes and subsidies, and enable producers to sell their
products cheaper in the country.

Soy Pardede, an executive at the Indonesian Chamber of
Commerce and Industry (Kadin), said that the government should
first conduct a study on the real conditions of local industries
before pushing through its plan to sign an FTA.

Should the government decide to pursue the plan, Indonesia
should be tough in its negotiations, he said.

"The government must ensure that Indonesia will not end up
only serving as a market for the U.S.," Soy told the Post.

Soy also warned that the move by the U.S. to sign FTAs with
each ASEAN member country, rather than with the region as a
whole, could threaten the ASEAN Free Trade Area (Afta) as it
would encourage ASEAN members to think about their respective
interests rather than the interests of the whole region.

"This is a bad sign for ASEAN. This is also strong evidence
that there is no longer synergy among ASEAN member countries,"
Soy said.

He, however, acknowledged that Indonesia had no alternative
but to go ahead with the FTA plan given the fact other ASEAN
countries intended to sign deals. Otherwise, Indonesia could lag
behind other ASEAN countries in taking the potential benefits of
an FTA.

"We have no choice. The Indonesia government must follow up on
the FTA plan as other ASEAN countries plan to (sign FTA deals),"
he said.

ASEAN comprises Indonesia, Singapore, the Philippines,
Malaysia, Brunei, Thailand, Laos, Cambodia, Myammar and Vietnam.

The U.S. is close to signing its first bilateral FTA with
Singapore.

Earlier this month, ASEAN agreed to create a historic FTA with
China that come into effect in 2010. Japan, which has signed a
bilateral FTA with Singapore, also plans to sign an FTA with
ASEAN.

Indonesia has also proposed signing a bilateral FTA with
Japan.