Malaysia asked to remove steel import restrictions

JAKARTA (JP): Indonesia has demanded Malaysia remove restrictions on steel imports as compensation for the delay in the implementation of the ASEAN Free Trade area's (AFTA) tariff reduction scheme for the neighboring country's automobile industry.

The Ministry of Trade and Industry said here on Friday that the demand which also included a requirement to cooperate in the automotive sector had been forwarded during a consultation meeting in Kuala Lumpur late last month.

"Malaysia seems open to consider Indonesia's compensation," it said, adding that both countries agreed to seek a peaceful solution.

Members of the Association of South East Asian Nations (ASEAN) had agreed to implement the AFTA free trade agreement, which requires tariff reduction between zero to five percent to encourage inflows of goods among members countries by next year.

Malaysia has been allowed to delay the tariff reduction scheme to protect its domestic industry against foreign imports. The country should, however, be required to pay compensation to those affected by its move.

"Indonesia is demanding compensation from Malaysia due to the loss of business opportunities caused by the delay," the ministry said.

The ministry said both Indonesia and Malaysia had held a number of consultation meetings to seek a peaceful solution to the problem. The two countries had also set July 18 as the time limit for the consultative meetings but no agreements had so far been made.

As the deadline passed without any agreement, Indonesia has the rights to unilaterally impose a countervailing measure based on the AFTA agreement. But the ministry did not mention what actions would be taken by the Indonesian government.

The original deadline for the implementation of zero import duty was 15 years after its conception in 1993, however in the ASEAN economic ministers meeting in Dec. 1998 in Hanoi, Vietnam, the deadline was accelerated to 2002.

The advanced implementation of AFTA in 2002 would only effect the six original signatories of ASEAN which are Brunei, Indonesia, Malaysia, the Philippines, Singapore, and Thailand.

The other four countries are to follow, with Vietnam in 2006, Laos and Myanmar in 2008, and Cambodia in 2010. (tnt)