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Indonesia should set up FTA with Japan ’soon’

23 December 2005

Indonesia should set up FTA with Japan ’soon’

The Jakarta Post, Jakarta

Indonesia could lose US$400 million in potential export revenues per year if it does not establish a free trade agreement (FTA) with Japan, while most other ASEAN members have done so to complement the region’s own free market in 2010, a study shows.

Rizal Affandi Lukman, assistant deputy for bilateral economic cooperation at the Office of the Coordinating Minister for the Economy, said in a workshop on FTAs on Thursday Indonesia could reap up to US$905 million in additional export revenues from the full implementation of the ASEAN Free Trade Area (AFTA), with each member country — including Indonesia — having their own FTAs with Japan.

However, having just joined the AFTA without establishing an FTA with Japan, Indonesia may only see an increase in export revenues by $504 million, as other ASEAN countries with FTAs with Japan grab the market for Indonesian exports of metals, mineral resources and paper products to the country.

"Indonesia could enjoy $1.1 billion more in export revenues if it had an FTA with Japan alone," he said.

"This shows that Indonesia must not lag behind other countries in the region in establishing an FTA with Japan, despite the AFTA and ASEAN’s plan to forge a group FTA with Japan," he said.

In all three scenarios, Japan would benefit over Indonesia, enjoying potential export revenue increases of $11.1 billion, $10.8 billion and $1.76 billion, respectively.

Rizal added that Indonesia should therefore prepare itself in negotiating its FTA with Japan, proposing commodities it was competitive in such as wood products, leather products and sugar.

The ASEAN grouping of nations has since 2004 rolled out its AFTA, which will be fully implemented in 2010. ASEAN as a group has also sought to establish FTAs with other countries and regions, including with Japan, which is expected to be agreed on within the next two years.

However, with negotiations going slowly, in contrast with ASEAN’s FTAs with China and Korea, several member countries have sought to establish their own bilateral FTAs with Japan.

Singapore has had an FTA with Japan since 2002, while Malaysia, Thailand and the Philippines are expected to secure their own by 2006.

Indonesia itself is still in preliminary talks with Japan, but without a definite timeframe on when it will be agreed.

Agreeing with Rizal, Deddy Saleh, director of regional cooperation at the trade ministry’s Director General of International Trade Cooperation, said that Indonesia must also prepare its local industries for its planned FTA with Japan.

"A successful FTA not only protects local producers but also improves their global competitiveness," he said.

 source: Jakarta Post