Seeing it from the Indonesian perspective, before the FTA itself was fully effective, 50% of the Indonesian market was already flooded with the Chinese commodities. After the FTA was fully effective, it seems that the local products are forced to compete with the overflowing Chinese products. Chinese products offers lower price with qualities that are competing with the local products with higher price, this results in being more preferable compared to local products. The question of was Indonesia well prepared in the first place to compete against the Chinese commodities is such the so called so last year question. It is indeed unconstructive and will lead Indonesians to a never ending discussion. Indonesia, together with China and other ASEAN countries were given 8 years, since 2 November 2002 when the framework of the agreement was signed; to prepare the national economic before it was fully effective starting this year.
The pressure as well was put on the government as they were advised to delay in signing the FTA, is delaying really a wise option? It might harm Indonesia’s credibility in the international eyes and Indonesia will be known as having inconsistence in finalizing treaty ratifications. Furthermore, China-AFTA is not a bilateral agreement which was signed by Indonesia’s President and China’s alone, it involves other ASEAN member countries. This places any amendments considering delay or changes in the agreement only possible to be further discussed if it is to be done with all together China and ASEAN countries.
Standing at this point today, it is how the government, NOT alone, but together with the local market actors, takes actions to compete against the Chinese commodities invasion. Indonesia must see the implementation of this agreement as an opportunity not as an obstacle which will destruct the national economy. Increase in the quality and quantity of the local products can strengthen the export flow from Indonesia to china. Indonesia must take the advantage of China being the most populated country, which means huge target market for export. Indonesian local producers still needs its government to encourage their competitiveness against Chinese producers.
Therefore, government through its ministries shall implement policies which could protect the local industries. Anti-dumping and SNI (Standard National Indonesia) are both baby steps taken by the government, asides from the soft power diplomatic to advertise the local commodities abroad. The fact that Chinese government is very protective of its industries has been the biggest advantage for their local businessmen. On the other hand, local businessmen in Indonesia do not have the same privilege. For example, lack of capital is not being supported by the development of economy infrastructure by the government. Let alone the infrastructure, the complicated bureaucracy, illegal commodities, as well as non conducive government policies had been some of the factors that held Indonesian local businesses from developing. Unless the government does not recover the local economic system, it takes more than empty encouraging speeches to protect the local industries.
Nevertheless, Indonesian businessmen shall not be skeptical with the government’s enthusiasm nor should they be pessimistic with their own products. There is always something to gain from what has been lost. Indonesia with the advantages of having the rich natural resources can compete with Chinese nature products, or even better export the natural resources to the Chinese market. While on the other hand, China with its advantage in technology could sell its electronic devices in Indonesia with lower price than the devices imported from Western countries.
There are plenty of advantages that Indonesia could gain from this agreement. China’s emergence, especially after showing a high growth of economy even during the 2007 crisis, must be seen as an advantage for Indonesia. The weak-buy character of Indonesian local customers could be replaced by the Chinese market with higher-buy character. The fact that China has a strong emerging economy growth together with its large target market, Indonesia can definitely look at this agreement as an opportunity.
At the end of the day, no matter what, the tariff barrier could no longer protect the local Indonesian industries; it is upon the government together with the private sector to build a more competitive and protected national economy.
Posted on July 8, 2010
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