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NEWS UPDATES 1 December 2009

Indonesia seeks to delay implementation of China-Asean FTA

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Several industries in Indonesia will ask for a postponement of the implementation of the China-Asean Free Trade Agreement because they were not yet prepared, Minister of Industry MS Hidayat was quoted by national news agency Antara as saying.

"We will write official letters to members of the Association of Southeast Asian Nations (Asean) first to ask for the postponement of the CAFTA implementation and usually they would ask for a compensation," he said in Jakarta on Monday after meeting with executives of the Indonesian Chamber of Commerce and Industry (Kadin).

He said 10 industrial sectors had expressed complaints with regard to the planned implementation of the agreement in January 2010. They are the steel, petrochemical, textile and textile products and garment, food and beverage and children`s toys industries.

Hidayat said he had agreed with trade minister Mari Pangestu to summons associations that had said they were not yet ready to compete under the CAFTA.
The government, he said, would listen to their explanation and reasons with regard to lack of readiness.

"If their explanation is reasonable we will send official letters to the other Asean member countries. Usually they will ask for a compensation for sectors in their respective countries," he said.

Hidayat said "the implementation of CAFTA on January 1, 2010 will proceed but before that we will send a letter to other Asean countries," he said. He admitted that only Asean members had expressed objection to the date of the CAFTA implementation.

To prevent the domestic industries from collapsing as a result of the CAFTA implementation, he said the government in one to two months from January 2010 would issue decisions affecting industries that are not included in the CAFTA 2010.

"Indeed something has gone wrong with our industrial development. Industries also have not been efficiently operating," he said.

He said three main areas would determine the country’s competitiveness, namely cost of interest, which is now still above 10 percent in the country while in other countries it is already below 10 percent, and economic cost which is also still high and the cost of port services which is also still high.

"Causes of the inefficiency could be the government and objective factors such as high interest cost which increases production cost," he said.

Hidayat believed Indonesia could compete with other countries except China. In response to the situation, Kadin`s deputy general chairman for industry, research and technology, Rachmat Gobel, said that the government had been rather late in taking action to increase the competitiveness of the country`s indutries which would be facing industrial giants like China.

"The government should have made breakthroughs, given fiscal incentives to domestic industries particularly for the procurement of raw materials, access and low bank interest and reduce economic cost.

If these are not done, it would be difficult for the national industry to face China," he said.

Gobel said the government also had to secure the domestic market by making the Indonesia National Standard a compulsory measure, and preparing laboratories to test imported products to assure quality.


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