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.