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Home  >>  Daily News  >>  Indonesia News  >>  Politics  >>  Indonesia lawmakers ask government to delay FTA implementation

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22 January 2010

Indonesia lawmakers ask government to delay FTA implementation

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Lawmakers demanded government notify Asean of its wish to delay and renegotiate tariff posts in the Asean-China ACFTA agreement to protect local industries, the Jakarta Post reported.

Legislators are concerned that the ACFTA may hurt local industries unable to compete with cheaper Chinese products. The ACFTA — based on a framework agreement signed in 2002 comes into full effect on Jan. 1 this year — with zero tariffs on 6,682 tariff posts in 17 sectors, including 12 in manufacturing and five in agriculture, mining and maritime sectors.

“We want a delay because it will create massive effects economically and socially,” said lawmaker Eddy Kuntadi of the Golkar Party during a hearing between the government and the House of Representatives’ Commission VI overseeing industry and trade on Wednesday.

The government was represented by State Cooperatives and SME Minister Syarief Hasan, Finance Minister Sri Mulyani Indrawati, Trade Minister Mari Elka Pangestu, Industry Minister Mohamad Suleman Hidayat and State SOE Minister  Mustafa Abubakar.

Mari said the government had sent a letter to ASEAN (Association of Southeast Asian Nations), requesting a renegotiation of some tariff posts but ASEAN secretary-general Surin Pitsuwan said the letter only mentioned the government’s concern that the ACFTA might hurt local industries.

Syarief said the ACFTA might hurt 51.3 million SMEs, which he claimed accounted for 99.99 percent of businesses in the country, quoting data from the Central Statistics Agency. SMEs employ 90.9 million workers, or 97 percent of the total labor force, and contribute more than half of Indonesia’s GDP of Rp 5,400 trillion (US$583.2 billion).

“Our observations show that Chinese products have flooded local markets. But we’re optimistic local products will not lose out against Chinese products,” he said.

Mulyani said the government would boost business competitiveness by revitalizing labor-intensive manufacturing industry and provide greater access for SMEs to borrow, while building and improving infrastructure to ease the flow of goods.

Hidayat said the customs and excise office had an early warning system to anticipate import surges related to the ACFTA. “If imports surge above 8 percent then this  becomes something we must look at.”

Lawmakers pushed the government to take “concrete action” within the next six months to protect local industries while pursuing renegotiation talks with related parties.

“After six months we will make an evaluation. The negotiation [talks] will not be quick,” said Commission chairman Airlangga Hartarto of the Golkar Party.

Businesses have asked the government to protect labour-intensive industries like textiles and footwear because of fear there may be layoffs.

Mulyani said the government has fiscal space in the state budget to protect certain industries hurt by the ACFTA and that the budget revision is underway.

 

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