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27 April 2010

Renegotiating ACFTA too costly, says Indonesian minister

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Indonesian Trade Minister Mari Pangestu said the government had chosen the option of "special talks" with China on the Asean-China Free Trade Agreement (ACFTA) because renegotiating the accord implied payment of huge compensations and also involvement of other Asean member countries, the Antara news agency reported.

Speaking at a meeting with the House Commission VI here on Monday the minister said the government had made various efforts to reduce public worries that ACFTA would cause national industrial products to lose the competition in domestic markets, including conducting special talks with the Chinese government.

She admitted in a press statement received by Antara that there were options of postponing the implementation of the ACFTA and renegotiating particularly the 228 tariff items on which Indonesia e feared it would lose the competition with Chinese products.

"But finally the option taken was holding special talks with the Chinese government because renegotiating the agreement will be costly because Indonesia must then pay huge amounts of compensation and also involve other Asean member countries," she said.

The option of special talks was more comprehensive and not only limited to the question of 228 tarif items and so it was considered more beneficial, she said.

She said if the government chose renegotiations, the option must be done in line with articles in the ACFTA. According to Article 6 of the ACFTA Indonesia must increase the compensations value to close to the modification value. The value of the 228 tariff items was expected to go up to U$1.2 billion upon renegotiation compared to only $43 million if the option was not taken.

The minister said the option would also require Indonesia to notify all parties with supplying interest in this case all Asean members and China. "This can make other Asean members to also ask for compensations from Indonesia," she said.

She said the settlement of the option would also take time because each tariff item to be renegotiated had to be checked. She said the option could also hurt the country`s image as it would demonstrate the country’s uncertainty that could affect other sectors such as investment.

She said by choosing special talks Indonesia would not be required to notify all parties with supplying interest so that it need not give compensations to other Asean member countries.

"Its settlement will also be relatively short and Indonesia will not also have to pay compensations to China," she said.

She said the special talks option was more comprehensive and actual with regard to increasing the competitiveness of the industries feared to lose in the competition as a result of the ACFTA.

She said the agreement was comprehensive because it was not only for boosting trade to become more balanced but also mutually beneficial covering also steps to increase competitiveness, investment, infrastructure development, credit facilities and other kinds of cooperation.

On April 2, 2010 in Yogyakarta Mari Elka Pangestu and her Chinese counterpart, Chen Deming, agreed among others to form a working group to analyze data and information of the two-way trade and recommend various steps with focus on products in the list of 228 tariff objects such as steel, textiles and textile products and shoes.

The working group is inter-offices involving the ministries of economic affairs, trade, industry, finance, agriculture and manpower.

The working group will also monitor trade balance and anticipate possible hikes of imports in the two countries. "The group will make recommendations and determine steps needed to respond them," she said.

She said her office would also set up a new directorate namely Directorate General of Standardization and Consumer Protection to monitor imported products especially with regard to their quality so that consumers would not be hurt. "The new directorate will support the implementation of standardization of national products to meet competition in the global market," she said.


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