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FTAs cause major Indonesia’s exports to be overdrown, according to Indonesia business group’s research

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Bisnis - 02 February 2023

FTAs cause major Indonesia’s exports to be overdrown, according to Indonesia business group’s research
By Indra Gunawan

The Indonesian Employers’ Association (Apindo) revealed that Indonesia’s export growth to partner countries has actually been slower after joining the Free Trade Agreement (FTA) which began in the early 2000s.

According to Apindo Chairperson Hariyadi Sukamdani, this conclusion came from Apindo’s analysis of the FTA’s record up to that point. In the period from 2012 to 2021, exports to non-FTA nations increased by 4.1 percent, while those to FTA partners increased by 3 percent. Then, the percentage of exports to FTA partner nations decreased from 68.3% in 2012 to 66.33%. (2021).

Since this occurred, imports from FTA partners expanded faster than imports from non-FTA partners. Imports increased from 78.3 to 86.3 percent of total sales.

In fact, the FTA was expected, according to Hariyadi, in order for Indonesia’s trade to increase.

"As businesspeople, we are introspective and discover that many are not prepared. So yet, only footwear, electronics, and textiles have been geared up. In the end, they are fortunate because many industries are not ready "At the Apindo Office in Jakarta on Thursday, 2/2/2023, Hariyadi gave a review of the book "Free Trade and Development of National Exports : The Role of National Products in the Import Market of FTA Partner Countries."

He argued that Indonesia must continue to grow its industries that generate added value. This is due to Indonesia’s exports being overly dependent on exports of raw resources or extractives, according to the CEO of the Sahid Group.

"We have increased, but the primary activity is in exporting. If it is properly managed, it will be OK, but if, as in North Maluku, the growth is 20% but the poverty rate is actually 80%, "Hariyadi stated.

Instead of encouraging the value-added industry, Hariyadi believes the government is still making it difficult for it to grow. He cited the taxes imposed on business actors when importing raw materials as an example.

"We are importing VAT-registered materials, but we are not yet trading. Meanwhile, during the FTA, the tariff on their goods to us was zero. So the issue is at the end of our product, which is sold domestically, and the issue is at the end, "Hariyadi stated.

Meanwhile, Yose Rizal Damuri, Executive Director of the Center for Strategic and International Studies (CSIS), revealed that FTAs only bring up market access. He stated that if a country cannot read the market, FTA will not be used optimally.

"Competitiveness, marketing intelligence, and market access cannot be used optimally if there is no competitiveness. We cannot, for example, solve the problem of making flies. Production competitiveness cannot be separated from the overall industrialization policy "He stated during the discussion.

He stated that Indonesia should follow the lead of India and China in assisting business actors in developing competitive products. "It’s okay for them to be subsidized, but within the framework of supporting competition. It is difficult to increase competitiveness when there is no competition," Jose explained.

 source: Bisnis