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NEWS UPDATES 13 November 2009

Indonesian chamber concerns over impact of FTAs

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The Indonesian Chamber of Commerce and Industry (Kadin) has requested inclusion of guidelines for bilateral and multilateral trade agreements in the coming trade law in a bid to create a better fit between trade and industrial policies, reported theJakarta Post.

In a hearing Wednesday with House of Representatives Commission VI overseeing trade and industry, Kadin representatives expressed concern over Indonesia's aggressive moves towards market liberalization through various forms of free trade agreements (FTAs).

"Liberalisation should also have rules," said Benny Soetrisno, Kadin's deputy chairman on trade and distribution. Kadin's request was driven by the concern of local business players over potential negative impacts from FTAs, particularly with China, Australia and New Zealand.

The FTA with China, part of the Asean-China FTA, beginning with an early batch of tariff cuts in 2005, will see full eradication of tariffs on most goods starting next year. Indonesia textile, nail and wire manufacturers are among those suffering the most from tariff cuts in the past four years.

The Indonesian Textile Producer Association (API) estimates that 70 percent of textile products distributed in Indonesia are imported from China. These imports have forced Indonesian producers to focus on upper scale goods, mainly for exports, as they can't compete with *underpriced' Chinese products.

The nail and wire producers suffered a more rapid deterioration with their production level plunging to 30 percent of capacity in 2007 from 80 percent just a year before. The dire condition of the industry has forced the government to impose safeguard measures on nail and wire imports from China.

The FTA with Australia and New Zealand, which was signed this year, is feared may hurt domestic meat and milk producers. Kadin's concerns were welcomed by members of House Commission VI. Commission member Mukhamad Misbakhun said the upcoming trade law - currently being drafted by the trade ministry - must protect the interest of both the domestic market and industry players.

A trade law must serve as a guideline to regulate "how wide Indonesia, as a market to imported goods, is opened", he said. He also said the government "must" review FTAs that were already implemented and "delay" the implementation of unfinished FTAs until a trade law was issued.

The Commission said it will summon trade ministry representatives to discuss the inclusion of extra provisions in the draft to guide FTAs. The completion of the draft is part of the ministry's 100-day program.


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