T

he Finance Ministry said cheap imported goods from China might begin to flood Indonesia in the second quarter of this year as a result of the full implementation of the free trade agreement with the country early in January.

The agreement between China and ASEAN countries (ACFTA) became fully effective on Jan. 1, when zero tariffs came in on 6,682 tariff positions in 17 sectors including 12 in manufacturing and five in agriculture, mining and maritime sectors.

“The [result of the] FTA has yet to be seen. It seems [the imports] will be seen in the second quarter,” Agung Kuswandono, director at the Directorate General of Customs and Excise, said Monday in a seminar on “Dissecting the 2010 State Budget”.

“It usually takes two or three months to ship goods after preparing all necessary documents [in early January]. I assume the goods will enter [Indonesia] in late March [at the fastest],” he further explained to The Jakarta Post.

Local businesses fear they may lose out on competition with cheaper Chinese products. Even before the ACFTA, Chinese products have flooded the Indonesian market, many of them brought in illegally.

“We oversee [the influx of Chinese products] day by day. We hope there will be no spike,” said Agung.

Coordinating Minister for the Economy Hatta Rajasa has said Indonesia has a team to cushion negative impacts resulting from the full implementation of the ACFTA.

The team’s tasks include protecting the domestic market from smuggled goods; supervising the issuance of import documents; helping to expand export markets; improving the domestic market; and promoting local products, he said.

Hatta said Indonesia is in preliminary discussions with China and related parties to possibly delay the full implementation of the zero tariffs on certain products until as late as 2011 or 2012.

Trade Minister Mari Elka Pangestu, who is in charge of trade discussions, has repeatedly refused to explain detailed progress on this.

Agung said the Directorate General of Customs and Excise has an early warning system to detect a spike in imported goods from China. It will control any influx with measures allowed by the World Trade Organization, which include safeguard measures, anti-dumping measures and countervailing duties.

Agung also said that in 2010 Indonesia will comply with the ASEAN-Korea FTA, which applies to 90 percent of commodities, and in 2013 with the Indonesia-Japan Economic Partnership Agreement, which applies to 93 percent of commodities.

He added there would also follow the Australia-ASEAN-New Zealand FTA, the ASEAN-Japan
Comprehensive Economic Partnership and the ASEAN-India Free Trade Area.

Agung said the ACFTA would likely reduce net import duties received by the government.

“But the elimination of import duty because of the ACFTA will reduce costs for the real sector, which will raise profits that will increase domestic tax revenue,” he said. From early January to Feb. 12 this year import duty dropped to Rp 2.01 trillion (US$217.08 million), down slightly from Rp 2.03 trillion in the same period last year.