RI must improve competitiveness to gain from free trade

The Jakarta Post, Nusa Dua, Bali

The Indonesian economy will benefit from the planned Free Trade Area (FTA) arrangements between ASEAN and its key trading partners, but industry leaders and experts warned that both business and the government must work hard to boost the country's competitiveness.

"We think there will be huge benefits for the economy and business," said the president of state-owned Bank Rakyat Indonesia (BRI), Rudjito, on Sunday on the sidelines of the first ASEAN Business and Investment Summit here.

The leaders of the 10 member countries of the Association of Southeast Asian Nations (ASEAN) will sign agreements on the establishment of FTAs with Japan and India at this week's annual summit. Under the plans, the six founding member nations of ASEAN will have a FTA in place with India by 2011, and by 2012 with Japan.

Last year, ASEAN also signed an agreement to establish an FTA with China by 2010. The products to be included in the FTA plans, however, are still being negotiated by trade officials.

The FTA plans are expected to boost trade and investment between the region and the three countries.

Rudjito said that each country had its own economic strengths that could benefit from the FTA plans, pointing out that, as an example, Indonesia had comparative advantages as a production base for the food processing industry.

But he acknowledged that there would also be adverse impacts on local industries from increased competition with foreign players as the economy became more liberalized.

"We hope the government can negotiate the terms of the FTA plans so that they will not produce major losses for us," he said, adding that for the time being, protection of the agriculture sector must be maintained as its efficiency lagged far behind other countries.

BRI is the country's largest bank, which focuses its business on micro financing, including financing for the agriculture sector.

Meanwhile, president of apparel producer PT Great Rivers Internasional, Sunjoto Tanudjaja, was a little worried about the FTA plan with India, which is one of Indonesia's strongest competitors in the textiles and apparel market.

"We're being forced now to rapidly improve our efficiency, particularly as India is a tough competitor," he said.

Agriculture expert HS Dillon said that the country's industrial sector was not yet ready for competition with foreign players.

He criticized the government's lack of seriousness in improving the country's investment climate and competitiveness.

"There's no serious efforts being made by the current government to boost competitiveness. What should we do now? We must wait for the election!"