Soeharto for free trade

Many businessmen and analysts, even those in Indonesia itself, are still surprised at President Soeharto's enthusiasm about the free trade concept recommended by the Eminent Persons Group and the Pacific Business Forum. Such surprise is, to a certain extent, understandable because, as recently as last year, Indonesia was still dragging its feet on the process of establishing a free trade area in the ASEAN sub-region. Now it is committed to widely opening its market not only to its ASEAN neighbors, but also to the much more powerful traders Japan, the United States, South Korea, Australia, China and Taiwan.

The dramatic change in the country's attitude naturally raises some questions as to the motives and the reliability of the official support of the free trade scheme for the APEC region. Some analysts unavoidably relate the new attitude to Indonesia's chairmanship of the 18-member APEC and consequently suspect the move to be a public relations ploy to support the leadership of President Soeharto, who is also Chairman of the Non-Aligned Movement.

However, we share the views of many other economists, who see the new stance as the natural consequence of the latest developments in the international economy, notably the accelerated process of economic globalization, and the strategy of economic development Indonesia has adopted since the mid- 1980s.

Seen from the massive deregulation measures, which were started in 1985 in coincidence with the launching of the export- led economic development strategy, Indonesia actually has no other choice but to support free trade. Trading involves two-way traffic. Indonesia cannot continue to expand its exports without opening its market as well.

True, in the past the Indonesian government was often criticized as sometimes inconsistent with its stop-and-go policies in the foreign trade sector, notably during the first few years of the massive deregulation drive.

But as the country has been enjoying an annual export growth of more than 15 percent over the past decade, it has become increasingly confident in its ability to compete in the international market.

The keener competition for international capital from seemingly greener pastures, such as China, India, Vietnam, is also forcing Indonesia to turn more to free and open market forces and free trade to keep it highly attractive to foreign investors.

Obviously, the second APEC economic leaders meeting in Bogor early next week will have to discuss agreeing on a fixed time schedule for a free trade area in the APEC region. At the very least, President Soeharto's support of the idea provides a strong signal to both domestic and foreign businessmen about the future course of Indonesia's long term economic development. That will consequently impose a lot of homework related to implementing policies conducive to free trade on Indonesia's bureaucrats.