U

nder the framework of the Association of Southeast Asian Nations (ASEAN), Indonesia is set on Tuesday to fully implement a free trade agreement (FTA) with neighboring Australia and New Zealand.

The Trade Ministry’s director general for international trade cooperation Gusmardi Bustami said on Monday that local producers would gain many benefits from lower tariffs on various products covered by the FTA.

“Around 90 percent of tariffs in Australia and New Zealand will be eliminated following our implementation of the agreement,” he said.

Indonesia is the last ASEAN member-state to join the ASEAN-Australia-New Zealand FTA after calls from several business groups to delay ratifying the deal over concerns of huge losses to local businesses.

The negotiations on the establishment of a free trade area with ASEAN’s 10 members began in 2005. The deal was sealed on Feb. 27, 2009, in Phetchaburi, Thailand, at the 14th ASEAN Summit.

According to the tariff commitments, Indonesia will eliminate 90 percent of 10,000 tariffs listed in the normal track when the deal comes into force on Tuesday.

The products impacted include imports of live animals, fruit, vegetables, meat, fish, milk, cheese, eggs, pharmaceuticals and wood and paper products.

Tariffs on goods on sensitive lists, such as beef and dairy products, will be removed by 2020 to give local producers more time to prepare.

Based on the schedule, a further 6 percent of tariffs categorized in the sensitive track, which covers 1,000 items, will be phased out gradually by 2020, while the lifting of the remaining 4 percent of tariffs comprising 400 items will depend on further negotiations.

Following the removal of the tariffs, Gusmardi said, Indonesian products might compete better with products from other countries, such as China.

“This gives us an opportunity to sell several of our products that have had difficulties gaining market access there,” he said. Gusmardi further asserted that Indonesia’s economic relations with Australia and New Zealand were complementary in nature and the tariff removal on the Indonesian side would pose little risk to local businesses as few Indonesian products competed head-to-head with rivals from those countries.

Indonesian Employers Association (Apindo) deputy chairman Anton Supit agreed, feeling that the benefits outweighed the costs.

“We can better compete with products from other countries that do not have a similar deal with Australia and New Zealand,” he said.

However, Anton noted that the lower tariffs would not bring immediate benefits unless local manufacturers boosted their competitiveness.

Indonesian Cattle and Water Buffalo Breeders Association secretary general Rochadi Tawaf said that local breeders were still opposed to the removal of tariffs on dairy products.

A zero tariff on milk, for example, would prompt milk processing plants to buy imported milk, which would be cheaper than local milk that enjoyed no government incentives, he said.

“Another risk is that we will be open to second or third quality meat imports, which will be sold at a very low price. This in turn, will distort the local market,” he said.

According to Rochadi, the government should create an improved business climate through low interest rates and similar assistance to that offered by the Australian and New Zealand governments.