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Jakarta Post

RI told to learn from mistakes in regional trade pacts

  • The Jakarta Post

    The Jakarta Post

Jakarta   /   Mon, April 7, 2014   /  09:09 am
RI told to learn from mistakes in regional trade pacts

Indonesia should take a lesson from its trade partnership agreements with Japan and China before it signs a similar trade deal with South Korea, observers and businessmen have said.

University of Indonesia (UI) international trade observer Mahmud Syaltout said that Indonesia should not repeat the mistakes it had made in its economic partnership agreements with the two countries.

The free trade agreements (FTAs) with China under the ASEAN-China Free Trade Agreement (ACFTA) and with Japan under the Indonesia-Japan Economic Partnership Agreement (IJ-EPA) provided little benefits to Indonesia, he said.

'€œWe, therefore, do not need to hurry to sign a deal with South Korea. We really need to learn from our experiences with China and Japan,'€ he said in reference to the comprehensive economic partnership agreement (CEPA), which is currently being negotiated between Indonesia and South Korea.

The CEPA is expected to further liberalize trade between Indonesia and South Korea by offering duty cuts on 1,051 tariff lines outside those covered by the free trade pact under ASEAN-South Korea framework. More than 90 percent of the lines put on sensitive and highly sensitive lists under the ASEAN-Korea trade pact are industrial goods, while the rest are agricultural, fishery and pharmaceutical products.

The duty reduction that Indonesia still seeks from South Korea covers US$150 million in exports, while a similar cut that South Korea demands from Indonesia affects $530 million in its outbound shipments.

Bilateral trade between Indonesia and Korea was valued at $21.1 billion in January-November last year, down by 13.86 percent from a year earlier. Negotiations on the proposed economic partnerships are now in their final stage.

Industry Minister MS Hidayat said recently that the government was still trying to find a '€œwin-win'€ agreement for both countries. '€œFor our national interest, we want the trade agreement to be able to attract more investment from South Korea,'€ Hidayat said.

Likewise, the FTA with China seemed to benefit only Chinese companies, as indicated by the increase in Indonesia'€™s imports from the country. The deal instead further widened Indonesia'€™s trade deficit, as Indonesian companies failed to benefit from easier access to Chinese markets.

Indonesia recorded a trade surplus of $357.9 million with China in 2001, but it then posted a trade deficit in 2008 onward, reaching a total of $7.2 billion last year, data from the Central Statistics Agency (BPS) shows.

Mahmud said that after the implementation of the ACFTA, many Chinese horticultural products, which were sold at low prices, flooded the Indonesian market.

According to data from the Trade Ministry, China contributed to around 35 percent of Indonesia'€™s total horticultural imports and accounted for 55 percent of total fruit imports in 2011.

The ACFTA was signed in 2004, but the agreement was enforced in 2005 for trade in goods and in 2007 for trade in services. The agreement requires ASEAN countries and China to eliminate tariffs on 90 percent of their products by 2010.

Meanwhile, Sri Adiningsih, an economist at Gadjah Mada University, said that the government should ensure that any partnership agreements with other countries would enable Indonesia to speed up the transfer of technology through capacity building.

Indonesia'€™s trade deficit with China had been ballooning since the implementation of the ACFTA because Indonesia and China had similar competitive advantages, and the agreement was all about market liberalization, she said.  

'€œMeanwhile with Japan, under the IJ-EPA, we can still have a trade surplus because our products and Japan'€™s products are complementary,'€ Sri said.

With South Korea, Indonesia had to make sure that the nature of the economic partnership would be similar to that with Japan rather than the one with China, she said.

Indonesian Employers Association (Apindo) deputy chairperson Shinta Widjaja Kamdani said that the country'€™s business players had yet to benefit from the ACFTA deal.

 '€œAs business players, we don'€™t really care what kind of agreements our country has with its trading partners. We demand something real, wider market access and capital injection for our firms,'€ she said. (koi)

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