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3 April 2010

Indonesian exporters yet to adapt to ACFTA

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The free trade agreement between Asean and China (ACFTA) has been cited as not being been “effective” for Indonesia as imports from China surged in the first two months of 2010 over the same period last year, the Jakarta Post reported.

The Central Statistics Agency (BPS) announced Thursday that non-oil-and-gas imports from China surged by 55 percent to $2.79 billion in the first two months of this year, from $1.8 billion in the corresponding period last year.

According to BPS data, non-oil-and-gas goods from China topped Indonesia’s imports, contributing 18.58 percent to the total non-oil-and-gas imports.

However, non-oil-and-gas imports from China decreased slightly by 1.8 percent from $1.41 billion in January to $1.38 billion in February, while Indonesia’s non-oil-and-gas exports to China were worth $986.2 million in February, down 2.4 percent from $1.01 billion in January, the data shows. BPS chief Rusman Heriawan said declines in both Indonesia’s non-oil-and-gas exports to and imports from China were a result of both countries’ traders using an older trading mechanism that was not under the ACFTA.

“The ACFTA was initially expected to boost exports to China and imports [from China]. Apparently, it did not [happen that way],” Rusman said at a conference at his office.

“In February, which was expected [to see the ACFTA come into effect], the ACFTA was in fact not [effective yet]. This means businesses have not responded to the ACFTA yet.”

In the initial phase of implementation of the ACFTA that came into effect early this year, the government scrapped 6,682 tariff lines in 17 sectors, including 12 in the manufacturing sector and five others in the agriculture, mining and maritime sectors.

An influx of manufactured products from China is expected accordingly. Indonesian exports to China (mostly are raw materials) will consequently enjoy zero duties, unlike China, which exports mostly manufactured products.

Indonesia exports mostly liquefied natural gas, as well as mining and agriculture commodities (including coal, bauxite, crude palm oil and cacao) to China.

Separately, Trade Minister Mari Elka Pangestu said it was more important to have Indonesia’s non-oil-and-gas exports to China continuing to grow than to have a surplus trade balance, despite the presence of the ACFTA.

She also said there was “good” news in bilateral negotiations between Indonesia and China in regard to the ACFTA in response to local manufacturers calls for renegotiation.

The results would be announced Saturday in Yogyakarta, when Indonesian and Chinese delegations are due to hold a joint commission meeting.


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