Some local products not ready to compete under AFTA, Kadin says

Adianto P. Simamora, The Jakarta Post, Jakarta

The Indonesian Chamber of Commerce and Industry (Kadin) said that some 27 percent of local products were not yet ready to compete in the ASEAN Free Trade Area (AFTA), which would start early next year.

Kadin's senior official Soy Pardede said on Tuesday that the unreadiness was due to various internal problems, which have been inhibiting the development of competitive and efficient local industries.

"Around 27 percent of local commodities are not yet ready to compete in AFTA," Soy said, adding that the information was gathered based on a survey involving 80 business associations.

According to Kadin's data, the products that are not yet able to compete included coffee, steel, pipes, sugar, rice, industrial machinery, electric appliances, aluminum foil, cables, oil and gas products, paint and varnish products.

Under AFTA, the import tariff in the six founding member countries of the Association of Southeast Asian Nations (ASEAN), which includes Indonesia, Malaysia, Singapore, Thailand, Brunei and the Philippines, will be cut down to between 0 percent and 5 percent.

However, the four new ASEAN members of Vietnam, Laos, Cambodia and Myanmar will be allowed to delay opening up their markets until between 2006 and 2010.

Soy said that one of the main problems for the poor competitiveness of local products was their high dependence on imported raw materials.

He added that the government's aggressive tax policy, by imposing a very high level of value added tax and luxury tax on local-made products, was not helping local industries.

Soy said that other internal problems included the weak legal environment, the poor implementation of the regional autonomy policy and the uncertain business climate.

Kadin has been actively organizing meetings and conferences with local industries and business associations to examine their preparations in anticipating AFTA.

The result of these programs will be submitted as input for the government.

"We have submitted the facts to the chief economic minister and the trade and industry minister," Soy said

"It now depends on what the government will decide about the findings," he added.