Soeharto for free trade

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.