Indonesia may gain benefit in the Chinese market from the landmark signing of the economic cooperation framework agreement (ECFA) between China and Taiwan, a researcher says.
Mignonne Man-jung Chan of Tamkang University said Tuesday the signing of the ECFA would stimulate bilateral trade between the two rivals, and for this, Taiwanese companies would need to purchase more raw materials and unfinished products from Indonesia.
“I would say that when trade and investment relations — the current relation [between Taiwan and Indonesia] — is … Taiwan purchase raw materials from Indonesia,” she said. “If we have the ECFA, that means we have intensified, further deepening close trade economic relations.”
Chan was speaking in a discussion at the Habibie Center in Jakarta.
China and Taiwan signed a historic deal on June 29 to boost trade after decades of hostility, which Beijing hopes will lure the island neighbor into its embrace. The strongest ever relation between self-ruled Taiwan and China, which claims sovereignty over the island, will slash tariffs on about 800 items and ease financial sector rules. The pact will cut tariffs to zero within two years on 539 Taiwan export items worth US$13.84 billion bound for China versus only 267 valued at $2.86 billion headed the other way.
But the euphoria could start to fade quickly as the two move into much tougher rounds of negotiations. The pact covers only the easiest 800 of potentially thousands of items targeted for tariff cuts in years ahead, it said.
Chan said the signing of the ECFA also allowed Taiwanese companies that previously disguised their identities in order to penetrate the Chinese market to officially state their presence.
“A lot of Taiwanese businesspeople attempting to run away from the government’s regulations by restricting them to China’s market directly, go through a third party,” she said. “Signing the ECFA normalizes this relation, institutionalizes our economic relations. Our businesspeople don’t have to hide anywhere [now].”
Investment-wise Indonesia could get facilities that were not covered by the ASEAN-China Free Trade area when investing there, “using Taiwan as a spring ball to the enormous Chinese market,” Chan said. “China is currently talking about development in economic zones, in Hi Shi, Fujian province .... and other areas that Indonesia and China have not established in terms of favoring treatment.”
“But with our bilateral investment [between China and Taiwan], we could jump-start and take advantage.”
Chan also said Indonesia and Taiwan could initiate a free trade-style agreement between them as their bilateral trade might further advance with the signing of the ECFA, without having to challenge Indonesia’s one China policy.
But Fuadi Rasyid, Habibie Center administration director, said Indonesia’s one China policy was still a problem as the policy Indonesia had adopted had become more rigid than it was 15 years ago.
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