More Chinese products to flood local market: Businessman
More Chinese products to flood local market: Businessman
Zakki Hakim, The Jakarta Post, Jakarta
A businessman warned on Saturday that more cheap Chinese-made
products would flood the domestic market, and the local
industrial sector would continue losing its domestic market share
unless its problems were resolved quickly.
Sharif C. Sutardjo, the head of the China committee of the
Indonesian Chamber of Commerce and Industry (Kadin), told The
Jakarta Post that many local businessmen now preferred importing
cheap Chinese-made products to manufacturing them themselves here
given the various problems being faced by industry.
"Importing products from China is far cheaper than
manufacturing them in Indonesia. Therefore, many local
businessmen prefer to become importers rather than
manufacturers," he said.
Sharif explained that Chinese producers, backed up by the
country's financial institutions, were quite aggressive in
penetrating the Indonesian market.
"Unlike Indonesia, banks in China support their exporters and
give them incentives to export," he said on the sidelines of a
Business Forum at the Jakarta International China Expo 2003.
He said that in China, interest rates were between five
percent and six percent, as compared to two-digit rates in
Indonesia, while law enforcement in China was much better than in
Indonesia.
The entry of China into the World Trade Organization was also
expected to make China's small and medium enterprises more
efficient, he explained.
He said that last year China exported hundreds of industrial
products, such as footwear, motorcycles and trains, to Indonesia,
while Indonesia only exported about ten commodities, mostly
primary products such as oil, rubber, pulp and paper, and crude
palm oil, to the world's most populous nation.
In order to compete with products from China, Indonesian
manufacturing industry would first have to deal with domestic
problems like labor unrest, unfavorable fiscal policies,
smuggling and financial constraints, he said.
Foreign direct investment from China to Indonesia was still
small but there were some firms that had started to show an
interest in local energy and mineral resources companies, he
said.
"Investors from China are interested in oil, gas and coal," he
cited.
The investors were not interested in investing outside the oil
and gas sector, because they realize that Indonesian products
would not be competitive against Chinese products.
An official from the Investment Coordinating Board (BKPM) had
earlier said there were some investors who were interested in
investing in Indonesia, mostly in the agribusiness sector, but
were postponing their plans until after the general election next
year.
Last year, the Chinese-Indonesian trade balance stood at about
US$7 billion with a surplus of about US$1 billion in favor of
Indonesia, said Sharif.
Chinese-made products popular in Indonesia included electronic
goods, household appliances, textiles, footwear and motorcycles.
China and the Association of Southeast Asian Nations (ASEAN)
signed an historic agreement in November last year to create the
world's biggest free trade area (FTA), which is expected to be in
place in 2010, embracing 1.7 billion people and trade worth
US$1.2 trillion.
Experts earlier questioned the benefits of the free trade area
for Indonesia, considering that many Indonesian products had
become increasingly less competitive over the past year.
They said that free trade could boomerang on domestic industry
as cheaper products, mainly from China, would flood Indonesia.