ASEAN KEY DESTINATIONS
FTAs ‘benefit’ local exporters
Indonesia’s various free trade agreements (FTAs) with its trading partners have benefited its export-focused manufacturers, with many increasing their export volumes, a recent survey by a Jakarta-based think tank has revealed.
The survey, which was conducted by the Centre for Strategic and International Studies (CSIS) last year, shows that 62 percent of the 145 export-based manufacturers surveyed had increased their export volumes after the implementation of FTAs with some of Indonesia’s trading partners, including Japan, Australia, China and New Zealand through ASEAN.
“The free flow of goods and services, coupled with relatively low export-import tariffs, is the factor,” CSIS researcher Yose Rizal Damuri said on Tuesday.
The survey, which involved a total of 450 manufacturing firms operating in Greater Jakarta and Surabaya, East Java, revealed that 73 percent of the 158 respondents who imported raw materials believed that the supply of imports was more stable after the implementation of the FTAs.
Around 83 percent of the total of 450 respondents also felt that they could still maintain their share of the domestic market, with 58 percent of them believing that the domestic market had expanded.
Yose said that FTAs had also resulted in better productivity and performances by the firms, adding that a larger market and tougher competition stimulated them to innovate more.
The survey, however, highlighted that the utilization of FTA incentives was still relatively low with only 43 percent of the total respondents using preferential facilities, such as country of origin (COO) certificates, which enable them to access lower export or import tariffs.
“This is mainly due to lack of information and difficulties in obtaining necessary documents,” Yose said.
Hogi Santoso, export-import manager of PT Pilot Pen Indonesia, a subsidiary of Japan’s Pilot Pen, said his firm could only obtain COO certificates before shipment, while in other countries COO certificates could be obtained long before companies exported their goods.
Hogi admitted, however, that his firm had benefited from particular FTAs, such as the Indonesia-Japan Economic Partnership Agreement (IJ-EPA), which allowed him to import raw materials from Japan at a lower import tariff of 1.2 percent, compared to 5 percent before the implementation of the agreement.
Indonesian Employers Association (Apindo) deputy chairwoman Shinta Widjaja Kamdani said many business players had yet to take advantage of the maximum benefits of FTAs. “The lack of information about FTAs and hurdles in transportation and logistics have left many firms unable to access the benefits of FTAs,” she said.
Quoting Apindo’s previous survey of its members, she said only 20 percent of its total members said they had easier market access under the ASEAN China Free Trade Agreement (ACFTA).
Yose said FTAs had allowed Indonesia to export more value-added products and services than before.
According to Trade Ministry data processed by the CSIS, Indonesia’s total value of imported goods used for exports hit US$125.7 billion in 2009, higher than the value of imported goods for domestic consumption of $91.7 billion.
University of Indonesia international trade observer Mahmud Syaltout said, however, that ascertaining the benefits of FTAs could not be generalized, but must be based on each FTA.
“I think the positive [side of trading] with Japan under the IJ-EPA, for example, would be meaningless if we were still very much dependent on that country,” he said.
Letters that do not contain full contact information cannot be published.
Letters become the property of AseanAffairs and may be republished in any format.
They typically run 150 words or less and may be edited
submit your comment in the box below