Tue, 13 Apr 2010

Trade Minister Mari Elka Pangestus has insisted the implementation of the ASEAN-China Free Trade Area (ACFTA) will benefit Indonesia in the long term.

The minister said that in order to minimize negative impacts of the free trade agreement, the government would implement a program to help local industries to compete better with cheaper Chinese products expected to flood the country.

“Let us enhance and intensify our steps both to boost the industrial competitiveness and to secure the domestic market, in accordance with our commitments to continue all matters which have been agreed upon with China,” the trade minister told reporters after a hearing with commission VI of the House of Representative on Monday.

After the ACFTA came into full effect on Jan.1, almost 90 percent of tariffs on imports from either country have been reduced to zero. But Indonesia has asked China to postpone tariff reduction on a number of goods due to worries about difficulties that might be faced by small and medium enterprises (SMEs).

At the 10th Indonesia-China Joint Commission Meeting (JCM) in Yogyakarta on April 3, the two governments agreed to implement ACFTA as scheduled and not to postpone the application of 228 tariff posts as requested by a number of Indonesian entrepreneurs.

Contrary to these entrepreneurs, who considered the Yogyakarta meeting as having failed to accommodate their objections to tariff reductions, the minister saw it as a successful meeting.

Mari stressed that the government wanted to solve problems related to the reduction of tariffs on not only the 228 posts, but also those raised by companies involved in steel, textiles and shoes production.

“We will address the problems related to these three sectors not only through bilateral negotiation but also through a comprehensive government program to improve industrial competitiveness,” she said.

She mentioned besides trade issues that the Yogyakarta meeting also agreed to strengthen cooperation among financial institutions between the two countries in order to help promote direct investments.

“As soon as possible we will create an expert group within the office of the Coordinating Minister for the Economy to follow up the agreements that have been achieved,” she added.

She said that the expert group, for example, would discuss efforts to balance the two-way trade between Indonesia and China. “In January and February, our exports to China already increased by 138 percent while our imports from that country increased by only 50 percent. Yet, Indonesia still suffered a deficit in two-way trade,” she said. Separately, chairman of Commission VI Airlangga Hartarto told The Jakarta Post after the hearing that he wanted to know whether the minister had met the demand of entrepreneurs for the renegotiation of a delay in some tariff reductions.

“I didn’t say the meeting failed. I was just asking whether the tariff reduction was renegotiated by the government or not,” he said.

Airlangga emphasized that he didn’t see any efforts on the part of the government to renegotiate the tariffs on the 228 posts in question in the Yogyakarta meeting.