Singapore trade offer

Singapore trade offer

Singapore's offer to include information technology (IT)
products from Indonesian Bintan and Batam islands in its
bilateral free-trade pact with the United States is a smart,
well-thought move that will greatly help Indonesia and improve
the spirit of ASEAN cooperation.

The gesture will go a long way to reduce suspicions among
Singapore's fellow members in the ASEAN free trade area about its
aggressive move to open bilateral free-trade arrangements with
countries outside the region such as the U.S., Australia and New
Zealand.

The U.S. approval of the initiative to qualify IT products
manufactured on the two Indonesian islands for duty-free exports
from Singapore to the American market under a provision called an
integrated sourcing initiative will also be well-noted by the
Indonesian government as a gesture of goodwill on the part of the
U.S. government.

This trade offer, we think, will have a much more significant
impact on Indonesia's economy than the soft loan pledged annually
by the American government under the Consultative Group on
Indonesia (CGI) donor consortium, especially if the facility can
subsequently be extended to products from other islands in the
Riau archipelago.

Most important is the facility will make the Indonesian
islands near Singapore much more attractive to foreign investors
intending to tap the ASEAN and American market.

Access to the American market will allow foreign investors to
harness Batam's and Bintan's specific assets such as a strategic
location near Singapore, low-cost labor, good infrastructure and
fiscal incentives to produce highly competitive exports.

In fact, the Singapore-U.S. free-trade arrangement, which is
scheduled to be signed this year will be much more effective than
the ASEAN free trade area (AFTA) in wooing more investors to the
Riau archipelago. Officially launched earlier this year, AFTA has
yet to remove non-tariff barriers to facilitate really smooth
trading between member countries. Production standards have yet
to be standardized and transportation, communications and customs
procedures in ASEAN countries have yet to be made more efficient.

It is precisely because of its impatience with the slow pace
of trade facilitation efforts within ASEAN that Singapore has
moved aggressively to seek bilateral free-trade agreements with
other big trading countries.

Indonesia's Minister of Industry and Trade Rini Soewandi who
joined her Singapore counterpart George Yeo and U.S. Trade
Representative Robert Zoellick at a meeting in Bintan last
Saturday, is obviously excited about the offer.

Rini should, however, act immediately to gain the Cabinet's
full support for the project because the offer could be wasted if
the two islands, as the pilot project for the Singapore-U.S.
integrated sourcing initiative, are not made good hosts for high
capital IT factories.

Beside the standard requirements for a conducive investment
climate such as efficient licensing procedures, adequate
infrastructure such as port-handling facilities, trained labor,
the regulatory and bureaucratic environments on the two islands
should be made more conducive.

Creating an efficient regulatory and bureaucratic environment
is vital, especially for export-oriented industries, which
usually depend largely on imported inputs, as is the smooth
implementation of the integrated sourcing initiative within the
Singapore-U.S. free trade arrangement.

Inefficient port handling, corrupt immigration, tax and
customs service, which remain major sources of complaints among
the business community in Indonesia, are the main barriers to
global sourcing.

All these requirements are far beyond the authority of the
Ministry of Industry and Trade to handle. Therefore, it is most
imperative that the Cabinet throw its full support behind the
trade offer.