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ndonesia is slated to ratify the eighth package of the ASEAN (Association of Southeast Asian Nations) Framework Agreement on Services (AFAS) next year, which will further open the country’s service sector to regional players.

The deal is a prelude to the establishment of the ASEAN single market in 2015 that will see free flows of labor, trade and services among the association’s member nations.

AFAS ratification will affect sectors related to telecommunications, business services, education, tourism, health, recreation and logistics, covering around 22 subsectors, according to the Trade Ministry.

The agreement is expected to strengthen Indonesia’s commitment to the liberalization of the sectors by 2015.

“In 2015, companies [from other ASEAN nations] will be able to have as much as 70 percent of foreign equity participation in Indonesia,” said the ministry’s director for trade and service negotiations, Sondang Anggraini, on Wednesday during a workshop hosted by the ministry.

The government is preparing several legal frameworks to further regulate the service trade that will help local firms to achieve greater gains from liberalization, such as by selling services to other countries, according to Sondang.

“The policy will help shift the country’s source of foreign currency from the export of goods to the export of services,” Sondang said.

In recent years, Indonesia has seen a rise in the contributions made by the service sector to its economy.

Service-related sectors accounted for 53.13 percent of gross domestic product (GDP) in 2011, up from 48.20 percent in 2006.

Indonesia Logistics and Forwarders Association (ALFI) executive director Theo Kumaat was cautious about liberalization in the logistics sector, as it would severely impact local logistics players still struggling with output inefficiency.

According to Theo, Indonesia’s high costs of doing business had undermined its performance relative to its regional peers.

Indonesia ranks 59th on the World Bank’s 2012 logistics performance index, lower than fellow ASEAN members Vietnam and the Philippines

Despite the low ranking, Indonesia has seen a significant improvement in logistical handling competency and tracking systems, according to the World Bank.

“Most of our local companies are not yet ready to compete with regional players. If the government insists on liberalization, I am afraid that local players will only deal with subcontracting work to serve foreign companies,” Theo said.

The logistics sector, according to Theo, was still grappling with a shortage of skilled local workers. Opening more doors for more skilled foreign workers could result in jobs filling up once liberalization takes place.

In anticipation of changes in labor regulations, local stakeholders are planning to set up an institution that will establish standards and certifications for both local and foreign workers.

Liberalization of logistics services under the eighth AFAS comprises two major sectors: packaging and freight transportation, including maritime, freight, rail and road transportation; cargo handling services; storage and warehousing; freight transportation agency services; and courier services.

Indonesian Logistics Association (ALI) chairman Zaldy Masita said the government should keep the 49 percent cap for foreign ownership in local firms ahead of 2015.

“In general, our domestic players are not ready because there are so many issues that have yet to be addressed by the government. Only big local firms will thrive under liberalization,” he said.

At present, several foreign companies own majority stakes of up to 95 percent in local logistics firms as they operated before the government included logistics on a list of investments restricted for foreign entities in 2010. At present, foreign ownership is capped at 49 percent.