The year 2010 promises a new dawn for Indonesia as two free trade agreements (FTAs), which came into effect last week, give the country’s exports greater access to regional emerging markets regarded as the main engine of the global economic recovery.
Regardless of mounting con-cerns over China’s competitiveness and its feared negative impact on some domestic manufacturers, the reality of wider market access should be enough to bring about a recovery in Indonesia’s exports, Trade Minister Mari Elka Pangestu said Tuesday.
Mari said the government had developed ways to make optimal use of these export markets, which are now wide-open thanks to trade liberalization. The full implementation of ASEAN-China and ASEAN-6 FTAs took effect on Jan. 1 and opened the door to the export and import of almost all goods across the countries’ borders at zero tariffs.
Among those thought to directly benefit from greater market access to China are the exporters of 10 basic commodities: CPO and its derivatives, coal, rubber and its derivatives, copper, pulp, aluminum, nickel, CD-ROMs, octanol and iron ore.
Many believe the FTA with China will only benefit commodities. But Mari dismissed this.
“All products have the potential to penetrate China’s market, and not just those that are resource-based. Manufactured products such as glass and branded garments from Indonesia are also big in China,” she said.
Mari acknowledged there were still problems with regard to several industries that had claimed that the FTA with China would hurt their national market. But she maintained that the government had made “a quick response” by addressing these problems and protecting the domestic market.
Bowing to pressures from domestic manufacturers, the government submitted by the end of December a letter to the ASEAN Council for the postponement of full tariff reductions on 228 items under the ASEAN-China FTA.
Protection of the domestic market, she added, would include tightening controls on goods and services to meet national standards of quality, protection against unfair trade and increased promotion of Indonesia-made products.
“Our trade agreements with ASEAN countries started since 1992 and with China since 2004; many sectors have reaped benefits from these FTAs and we saw that our crude palm oil and cacao exports to China have risen,” Mari said.
She urged stakeholders to look beyond the simple measure of the bilateral trade balance between Indonesia and China but also to consider how trade relations with China would help improve the competitiveness of Indonesia’s manufacturing industries.
“We are importing a large amount of raw materials from China to be processed here in Indonesia not only for our domestic market but also for exports… to many other countries,” she said.
The ministry expects exports to be on a growth trajectory this year, growing by 5.1 percent. Non oil and gas exports are expected to grow by up to 7.5 percent, recovering from a 12 percent slump a year earlier.
The benefits from the greater access to emerging markets in Asia, Mari said, will also be coupled by the expansion of exports to non traditional markets, including those that were previously not pursued by Indonesia, such as Russia and the Eastern European countries.
