Monday, December 21, 2009

Asean-China FTA

On 1 January 2010, Free Trade Agreement (FTA) between 10 members of the Association of South East Asia Nations (ASEAN) and the People's Republic of China shall be implemented.

As a consequence, 2,528 goods manufactured in the People's Republic of China will be able to enter the ASEAN market free of any customs.

For Indonesia, where most manufacturers of those products have expressed that they are not ready, implementation of FTA would be like committing an industrial suicide.

Business and manufacturers associations like the Indonesian Iron & Steel Industries Association (IISIA), Association of Indonesian Businessman (Apindo), Indonesian Cosmetic Association (Perkosmi), have stated that their products are not yet ready to compete with much cheaper Chinese goods. Even before the FTA, Chinese good have taken quite a large portion of the market share.

The Coordinating Minister for Economy said that 303 products are not ready to compete e.g. cosmetics, textiles, steel, electronics, tires, furniture, cocoa processing, health care instruments, aluminium, upstream petrochemicals, sheet glass, footwear, machine tools and motor vehicles.

Due tho which facts, the Chairman of APINDO Sofyan Wanandi urged the government to use Article 23 of the FTA which enable countries to request for postponement of implementation of the FTA.

For detailed media reports on the above matter, please click here, here, here, here and here.

I hope that the government realize the devastating impact that the FTA will have on our economy i.e. stop of industries which will lead to widespread unemployment, and therefore postphone Indonesia's implementation of the FTA on products which we are still not ready for at least 3 years.


Image: Courtesy of Deplu Junior.

4 comments:

colson said...

Neo liberal free trade ideology/belief is still raging obviously...(and unfortunately)

To me it is still peculiar ( though I love adsurdity)that the pro forma communists of China are the most ardent advocates of this capitalistic economic system these days. Well, of course the benefit most of course..

Yet, a long time ago the six founding countries of the EU also began with a free trade zone. In the long run all six did benefit.

So I think there has to be something in it for Indonesia also if the country joins FTA . Though a transitional period - like you propose- seems to be wise in order to give the threatened industries an opportunity to inprove their competibility.

H. Nizam said...

Colson,

We should learn from experience of the EEC countries when they transformed into the EU.

It is ironic that Communist China has spearheaded the neo-liberal concept of free fight liberalism to gain market dominance.

Indonesia accepted the FTA in the hope that we will be able to get a good share in a market of 1.5 billion people, for our non- manufacturing products like: plantations, forestry, fishery etc.
This will cause us to be merely as producer of raw materials.

In order our manufacturing products be able to compete we need better preparation, therefore a transitional period of at least 3 years is inevitable.

Rob Baiton said...

Harry...

When do you think that Indonesia will be ready for this sort of FTA? I guess, I am referring to competitiveness. When will Indonesia be sufficiently competitive to make this a balanced deal?

H. Nizam said...

Rob,

Frankly speaking, I am not sure whether we'll be ready even the FTA is postpone for more than 3 years.
But we have to force ourselves to implement FTA i.e. by cutting down lots of unnecessary (extra) costs for permits, production, etc.
If postpone for three years we would at least be more ready (& confident)