RI's quiet entry into AFTA breeds free trade distrust

RI's quiet entry into AFTA breeds free trade distrust

Berni K. Moestafa, The Jakarta Post, Jakarta

Marking its debut into the free trade era, Indonesia opened
its market on Tuesday to the ASEAN Free Trade Area (AFTA), but
economists warned a lack of publicity about AFTA has given rise
to public distrust of the benefits of trade liberalization.

With AFTA in effect now, six members of the Association of
Southeast Asian Nations (ASEAN) have cut their tariff barriers on
major products to between zero and five percent.

The five other countries are Brunei, Malaysia, Singapore, the
Philippines and Thailand.

By lowering tariff rates, ASEAN expects to force industries
into boosting their trade competitiveness, and to lure investment
into the region.

After 10 years in the making, AFTA turned most of Southeast
Asia into a free trade area on Jan. 1, 2002.

But in the run up to AFTA, little was heard of from the
government to raise public awareness on the importance of AFTA.

"The government's publicity about AFTA has been overrun by
local free trade critics trying to protect their industries,"
said Umar Juoro, an economist at the Center for Information and
Development Studies (CIDES), on Tuesday.

He said the government had failed to properly inform the
public of the opportunities AFTA offered this country.

State sponsored seminars on AFTA are few if not nonexistent.

This lack of attention was evident in President Megawati
Soekarnoputri's new year speech, which did not even mention AFTA.

"They (the government) talk a lot about AFTA, and how we
cannot stop it from coming into effect. But they never get into
the details of what AFTA can actually do," Umar said.

With the government silent, he said, the public took its clues
from comments by the local business community, which were in
general negative.

Umar said the government should have come up with a strategy
for industries to make the most of the benefits and opportunities
offered by AFTA.

That way, he said, the government could have secured better
cooperation with the Indonesian Chamber of Commerce and Industry
(Kadin).

Instead, Kadin has turned into a staunch critic of AFTA.

The chamber recently issued a report claiming that 27 percent
of local products were unprepared to compete under AFTA.

Yet the government said nearly 95 percent of the country's
industries were already operating under AFTA import tariff rates.

An economist at the Center for Strategic and International
Studies (CSIS), Hadi Soesastro said that as Indonesia's tariff
rates were almost compliant with AFTA, the actual beginning of
the AFTA era would have a minor impact on Indonesia's industries.

Nonetheless, he said, companies preferred to keep hiding
behind trade protection rather than spending money to boost
efficiency.

"It's the same everywhere in the world: there is no other way
other than to force companies to boost their competitiveness," he
said.

AFTA was first planned in 1992.

At first, the six countries agreed on a January 2008 deadline,
but decided to bring forward the date to 2003 and later to 2002.

Hadi said that compared to the European Union (EU) market,
AFTA would have a smaller impact on the ASEAN market.

Trade among EU member countries makes up 70 percent of their
entire trade activity, leaving only 30 percent in trade with the
rest of the world, he said.

By contrast, intra-ASEAN trade made up only 20 percent of the
region's entire trade activity. That means ASEAN countries depend
more on rest of the world in trading their goods.

Hadi said with ASEAN's high dependence on global trade, one
key objective of AFTA was to raise the competitiveness of the
region's products in the world market.

Another important objective is to lure foreign investment into
the region. The free flow of production goods among ASEAN
countries is attractive to firms wanting to set up a global
production base, according to him.

In that respect, ASEAN is competing against China, which
recently made its entrance into the World Trade Organization
(WTO), and is attracting billions of dollars in investment.