Possible political backlash endangers liberalization

Possible political backlash endangers liberalization

JAKARTA (JP): Weakening government credibility and a possible
political backlash could endanger Indonesia's trade and
investment liberalization in the Asia Pacific Economic
Cooperation (APEC) forum, an analyst warned yesterday.

APEC Eminent Persons Group member Suhadi Mangkusuwondo said
wrong policies and policy inconsistency could weaken a
government's credibility.

"The national car policy, for instance, does not help the
Indonesian government's credibility," Suhadi said at a seminar
organized by the Centre for Strategic and International Studies
(CSIS).

The government's controversial car policy, announced in
February last year, grants duty and tax breaks to PT Timor Putra
Nasional to develop a sedan, called the Timor, in cooperation
with South Korea's Kia Motors Corp.

"Also the government's withdrawal of a number of agricultural
products from the ASEAN free trade agreement would undermine its
credibility," Suhadi said.

Last year Indonesia successfully excluded sensitive farm
products, namely rice and sugar, from ASEAN's free trade agenda.

"The government's sudden protection of upstream chemical
products does not help its credibility at all," Suhadi said.

Last June the government raised the tariff protection level
for ethylene and propylene to 25 percent from 5 percent.

It also raised the tariff protection level for polyethylene
and polypropylene -- derivatives of ethylene and propylene -- to
40 percent from 20 percent.

Another threat to trade liberalization momentum was a possible
political backlash, which might arise with pressure from certain
groups or businesses the APEC liberalization program affects.

"Although trade and investment liberalization will bring many
benefits to the national economy, it may hit certain sectors
which will become the losers," Suhadi said.

He cited examples of political backlash in some American and
African countries, in which the people resisted government
liberalization moves.

CSIS executive director Mari E. Pangestu agreed with Suhadi
and said trade liberalization often initially caused the collapse
of certain industries and increased unemployment.

"In the liberalization process there will always be winners
and losers. If we do not anticipate this matter, it might hinder
the pace of liberalization process," Mari said.

She suggested the government form a team to monitor the impact
of trade and investment liberalization on businesses.

To gain more from liberalization Suhadi said the government
and business should cooperate to find a "link and match" between
the liberalization drive and improving domestic efficiency.

The efficiency improvements should be pursued through
simplifying licensing procedures, reducing transaction costs,
improving infrastructure, promoting partnerships between large
and small businesses and more training for workers.

Suhadi also suggested the government look for a "link and
match" between trade and investment liberalization and economic
and technical cooperation under APEC's Manila Action Plan. (rid)