RI should reap benefits from information era

RI should reap benefits from information era

By Djauhari Oratmangun

GENEVA (JP): The recent Asia Pacific Economic Cooperation
(APEC) summit in Manila has endorsed the Information Technology
Agreement (ITA) by calling for its conclusion in the forthcoming
WTO ministerial meeting, which will take place next week in
Singapore.

This endorsement has not come as a surprise to most countries,
because since the QUAD's (the U.S., European Union, Canada and
Japan) ministerial meeting in Seattle in September 1996, these
countries have been actively pursuing this issue through
bilateral approaches.

But is Indonesia benefiting from ITA?

This question needs an answer. To do so, we need to educate
the industry sector on ITA.

The proponents of ITA agreed that the reality is there to
prove it: We are now living in the era of the information super-
highway. We cannot prevent technology advances in information
technology (IT) products such as computers, semiconductors and
others which are rapidly influencing the way business is
conducted.

The recent World Bank Report has predicted that the
information technology sector will be the largest industry in the
world in the next century, and will provide the foundation upon
which most other industries will be built.

Realizing that IT products would facilitate the advent of the
information age, the QUAD, in particular the United States,
suggested that there should be a "multilateral agreement" to
reduce tariffs on them.

This agreement aims to give businessmen better access to IT
products and to provide greater scope for competition. At the
same time, consumers will also benefit from cheaper IT products,
such as PCs. The QUAD is aiming to reach an agreement on IT
products to coincide with the Singapore Ministerial Conference,
in order to achieve free trade in IT products by the year 2000.

The QUAD's objective through ITA is the agreement by the ITA
signatories to eliminate barriers to trade -- especially high
tariffs on IT products -- by the year 2000, with the staging of
tariff cuts beginning in 1997.

According to the first proposal presented by the U.S., the
product coverage of ITA will include computers, hardware
products, semiconductors and integrated circuits, software,
telecommunications equipment and other IT products such as semi-
conductor manufacturing equipment. In general terms, the IT
products to be covered by ITA include calculators, computers,
computer parts, telecommunications equipment, magnetic media,
resistors, printed circuits and semiconductors, and integrated
circuits.

Recognizing the importance of the ITA and realizing the
eagerness of the proponents, as well as being under pressure to
have an ITA before the Singapore conference, many IT producing
countries, particularly in Asia, have prepared a "request list"
to be included in the product coverage of the ITA.

As a member of APEC, which has also endorsed the ITA,
Indonesia needs to benefit from the opening of the IT foreign
markets. The domestic industry, which is heavily dependent on the
use of IT products, will benefit from the "lower import tariff on
IT products". At the same time, Indonesia can also protect its IT
producers which are still in the early stages of development.

Indonesia has been considered both as a "potential" producer
and as a big consumer of IT products. Forecasts put the total
value of trade in information technology products somewhere over
US$400 billion. Whether Indonesia can also benefit from a share
of that amount will depend on how it will proceed with the
negotiations and how strongly the private sector will pursue it
through market intervention.

The consumer is certain to benefit from the cheaper IT
products on the domestic market, due to the "lower import
tariff". How the industry will benefit from the ITA is again
another question. However, according to the proponents, the ITA
will help industries, businesses and consumers to move decisively
into the information age by lowering costs, improving
productivity, increasing the speed and accuracy of information
exchanges as well as the viability of new businesses and consumer
services, and promoting interregional industrial cooperation.
Thus, it is important to eliminate tariffs which, in essence, are
a tax on information, competitiveness and productivity.

For Indonesia, the price of a personal computer will be
cheaper as a result of the elimination of the import tariff. For
the industries such as the textile industry, which also depends
on IT products such as computers, production costs will be lower.
Therefore, the product itself will be more competitive in the
world markets. The problems for Indonesia as a potential producer
of IT products is how to protect its IT industries in their early
stages of development, since they are not ready yet to compete
with the IT producers from big countries such as the U.S. and
Japan, as well as the European Union.

However, if we look at the win-win solution pointed out by
experts, the Asian countries will be able to sell their products
cheaper in the U.S. and Europe, while their own consumers at home
will be able to buy cheaper PCs and software.

As the information age is already around the corner, Indonesia
was right to agree to endorse the ITA at the APEC meeting.
However, we also need to be very cautious and active in securing
the benefits which parties to the agreement can expect. This kind
of expectation has to be achieved through Indonesian negotiations
in the field, in particular in Geneva, where the APEC leaders'
decisions have been actively followed up by ITA proponents, and
in Singapore during the ministerial conference, where the ITA is
expected to be reached.

Steps which Indonesia needs to take in approaching ITA
include:

a. Along with the ASEAN countries, trying to negotiate for the
greatest amount of flexibility, as provided by the longer
timeframe. Therefore, Indonesia should argue against the
suggested year-2000 deadline, taking into account the fact that
Afta will come into effect by 2003.

b. Along with the private sectors/industries, studying the
list of the product coverage as proposed by the proponents and
analyzing whether Indonesia could benefit from it in both the
short and long term.

c. Using the flexibility agreed by APEC leaders to prepare as
comprehensive a "request list" as possible to be included in the
product coverage of the agreement. In preparing the "request
list", Indonesia should concentrate more on products with dual
purposes, namely to benefit the domestic consumer (including the
business community) and to gain market access in the U.S. and
Europe by protecting the domestic IT industries which are still
in their early stages of development.

d. In preparing this "request list", the government should
consult closely with the IT industries, as well as with state-own
companies which deal with telecommunications agencies, such as
INDOSAT and others, since the proposed coverage of the ITA also
includes telecommunications equipment.

Indonesia should also make use of its willingness to join ITA
as "bargaining power" for other purposes in the international
trade arena. The Singapore Ministerial Conference on the WTO,
which the APEC leaders have set as a target date on which to
agree on the ITA, is only days away. Therefore, we should act
quickly if we want to gain as much as possible from ITA, as time
is running out.

The countries which will derive the greatest benefits from the
opening of the market that ITA will create are the big powers
and, in particular, the original proponents. Otherwise, President
Clinton would not be lobbying so actively at the APEC meeting to
back the IT tariff proposal.

Djauhari Oratmangun,an observer of international trade
negotiations, currently works in Geneva.