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Stung by Asean-China deal, Minister asks for FTA delay

Jakarta Globe | April 10, 2011

Stung by Asean-China deal, Minister asks for FTA delay


Industry Minister MS Hidayat has asked for a postponement of the free-trade agreement between Indonesia, Australia and New Zealand to allow for further study.

“If an FTA is to be concluded, a list of its advantages and disadvantages must be made first and an intensive discourse with the business world must be held,” the minister said on Saturday.

He said studies, discourse and pointing out sectors that would be affected by the agreement were important to avoid the emergence of problems after the deal was signed.

“It should not happen that the FTA will only benefit Australia while the expected investment doesn’t take place in the country,” the minister said. He said the most important thing was bringing benefit to and serving the interests of Indonesia.

Government officials and business figures have complained recently about being on the short end of trade agreements.

Hidayat cited the Asean-China Free Trade Area as an example, saying it resulted in losses to a number of local industries, such as textiles and textile products, footwear, electronics, furniture, toys, machinery, steel and cosmetics. Government figures show reduced production between 25 and 60 percent, while domestic sales, profit and manpower fell between 10 and 25 percent.

“In order to overcome this problem, the ministry is carrying out coordination to take precautionary measures and increase competitiveness,” he said.

Indonesia’s increased wariness has delayed a free-trade agreement between Asean, Australia and New Zealand. The AANZFTA came into effect on Jan. 1, 2010, for Australia, New Zealand, Brunei, Burma, Malaysia, the Philippines, Singapore and Vietnam. Thailand followed soon after, while Laos and Cambodia ratified the agreement in November.

Indonesia is the only signatory that has yet to ratify the agreement. Michael Mugliston, a special negotiator for Free Trade Agreement Division of Australia’s Department of Foreign Affairs and Trade, said it must ratify the deal between Indonesia, Australia and New Zealand before proceeding with negotiations on the regional agreement, which he said would be supported by the earlier FTA.

Purbaya Yudi Sadewa, chief economist at state brokerage Danareksa Sekuritas, said the AANZFTA could still be beneficial.

“For example, Australia exports fabric for textile while Indonesia exports textiles back to Australia. That way, we have more added value than Australia,” he said on Sunday.

He also said Indonesian products could end up less competitive in Australia compared to other Asean countries that agreed to the FTA. “It will damage our export market,” he said.

 source: Antara