RI anxious ahead ASEAN-S. Korea talks

The Jakarta Post, Jakarta

Local industry players warned the government to make sure that the implementation of the free trade agreement between the Association of Southeast Asian Nations (ASEAN) and South Korea was not in conflict with national interests.

The Indonesian Olefin and Plastic Industry Association (Inaplas) and Indonesian Textile Association (API) reminded the government on Thursday to be careful with regard to which products it offered to be liberalized and which would remain protected in forming the FTA.

"Indonesia's FTA negotiation team should not be too aggressive and hasty in slashing import duties. The team should first consult industry players and assess the facts in the field," said Inaplas chairman Didi Suwondo as quoted by Antara.

API representative Rema Gita Wasisa said Indonesia should not slash its import tariff too much, as it would make the country lose its bargaining power in negotiations.

According to Rema, Indonesia exported yarn made of cotton, polyester and rayon to South Korea, and imported fabrics that contained nylon and acrylic fiber.

"Therefore, in the coming FTA negotiation with South Korea, Indonesia should propose to cut the tariff on textile products containing acrylic and nylon, which are not produced in the country as the industry needs them," he said.

Both associations were speaking on the sidelines of Indonesia's Preparation in facing ASEAN-Republic of Korea Free Trade Area symposium, held by the Ministry of Foreign Affairs.

ASEAN and South Korea will meet next week in Seoul to discuss a draft of the preferential trade agreement.

Leaders from both sides agreed in the ASEAN Summit in Laos last November to remove import tariffs from at least 80 percent of the total groups of products traded by the grouping and South Korea by 2009.

South Korea is ASEAN's fifth largest trading partner, with exports from ASEAN reaching US$17.1 billion in 2003, or about 4 percent of ASEAN's total exports.

Meanwhile, ASEAN imports from South Korea stood at $15.1 billion in 2003.

Investment-wise, ASEAN is South Korea's third largest destination region with a total investment of $11 billion in 2003.

In bilateral trade terms, Indonesia's non-oil and gas exports to South Korea reached $1.8 billion in 2003, while oil and gas exports stood at $2.55 billion in the same year.

Local associations have been reluctant to open the domestic market at the expense of losing the export market.

Early last year, the local oleochemical industry was stunned to learn that China had applied a lower import duty on Malaysia's palm oil derivative products as the commodity was not included in a program that preceded a China-ASEAN FTA implementation.

Officials at the Ministry of Trade, including former Minister of Industry and Trade Rini MS Soewandi, had said the commodity's exclusion from the Early Harvest Program (EHP) was decided upon request from the industry itself.

The industry opted to protect its local market at the expense of the potential export market to China.

Responding to the industry's complaint, the ministry quickly lobbied its Chinese counterparts to have stearic acid included in the EHP. China eventually granted the request and agreed to cut import duties on Indonesia's stearic acid to the same level imposed on the Malaysian commodity starting January this year.

Stearic acid is a palm oil derivative used to bind and thicken lotions and creams, and is also useful in making soaps and candles harder.