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August 27, 2008

Indonesian exporters warned of new EU regulation
A European Union regulation on imported products that contain chemicals may impede Indonesian exports to the region when it is enacted this year, the Jakarta Post quoted local business associations as warning.

The Registration, Evaluation, Authorization and Restriction of Chemicals (REACH) regulation was introduced in June 2007 with the aim to protect the environment and people from dangerous chemicals by requiring that suppliers register the chemical contents of their products.

Under the scheme, which will be enacted on December 1, products containing chemicals must be pre-registered with the European Chemical Agency or face a long and costly registration process before they can be exported to the EU.

With less than four months left to register, the government must quickly request the EU postpone the scheme's enactment as many exporters in Indonesia remain in the dark over its rules, said M.S. Hidayat, chairman of the Indonesian Chamber of Commerce (Kadin).

"REACH is a new, big obstacle that we, including the government, need to deal with. Otherwise, we'll lose our markets in the EU," he told The Jakarta Post on Tuesday.

The Central Statistics Agency (BPS) recorded $3.61 billion in non-oil and gas exports to the EU in the first quarter of this year, up 12.93 percent from $3.2 billion in the same period last year.

"I'll ask for a delay in the implementation because we need time to make some adjustments," Hidayat said, adding that he would meet with Trade Minister Mari Elka Pangestu and Industry Minister Fahmi Idris later this week to discuss the issue.

Budi Susanto Sadiman, secretary general of the Indonesian Plastic and Olefin Industries Association, agreed, saying that many companies in the country were unaware of the regulation and would face additional costs in meeting its demands.

The high costs will push up product prices, thus decreasing their competitiveness on European markets.

"REACH can damage the Indonesian chemical-based industry, such as the plastics industry. This will be costly," Hidayat told the Post, adding that small and medium companies would be the hardest hit as the registration costs would be beyond their reach.

"The worst part is many of manufacturers are still unaware of REACH," he said.

Sofjan Wanandi, head of the Indonesian Employers Association, said manufacturers remained oblivious to the scheme because the government is "notoriously lax in disseminating information among manufacturers".

However, Diah Maulida, the trade ministry's director general for foreign trade, said the ministry had been promoting the regulation for months through, among others, seminars and workshops.

Diah said a seminar on the issue would be held on Wednesday at the Industry Ministry.

Both Hidayat and Budi said they feared REACH would prompt other big markets, including the U.S. and Australia, to follow suit by implementing their own strict standards, resulting in further pain for Indonesia's exporters.

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