Tuesday, 9 July 2013


The ever declining volume and value of export had motivated business players to review the Free Trade Agreement [FTA]. As a matter of fact the latest development up to April 2013 showed that export of oil-gas and non oil-gas dropped drastically while import soared up. The result was that Indonesia suffered serious deficit in trading transaction.
Instead of pinpointing the cause of deficit, business players tend to blame FTA already agreed by the government. And yet when FTA was made, the government had communicated beforehand with business players. The fact that letter on national business people were desperately struggling to hold back invasion of foreign products into the domestic market indicated that in fact local business people were not ready to compete in FTA.
For example, when the China-ASEAN Free Trade Agreement was put in effect in 2010, it was China who was advantaged by FTA. Evidently bilateral trading between Indonesia and China brought surplus to China. Was CAFTA the culprit to be blame? Certainly not the one to be accountable for it was the government and local business people who failed to prepare themselves so when CAFTA was put in effect it did not bring benefit to local business people.
Allegations come out that FTA to be In effect in Indonesia might pose as threat to local companies. The consequence of FTA was that imported products would easily storm the domestic market. Unless well anticipated, it was not impossible that local producers might run out of business. For that matter the Government through the Committee for Indonesia Trading Safeguarding [KPPI] were ready to exercise safeguard. This was the expression of a loser in fair game.
It must be understood that as the world’s market tend to be more open and free of obstacles, the Government and business people should sit together to synchronize perceptions, mission and strategy to meet the challenges. This was a natural process, because each country would exercise international trading by maximizing export.
All the obstacles, in terms of tariff or non tariff were reduced or eliminated through bilateral, multilateral ar regional agreements. To Indonesia, being an exporter country, a condition as such could be advantageous. The country would have more opportunities to make offerings to another country.
However, the implications would bring negative impact, which would disadvantage domestic producers, particularly producers who needed imported goods as component of their products. The competition would be in terms of price or volume due to free lane principle in the domestic market.
Safeguard was an instrument to be used by members of WTO to secure producers at home due to import up jump. The objective was to protect natural interest. In case of serious threat of loss WTO members countries were allowed to exercise safeguard in terms of extra tariff, restriction of import quota, or both. The only thing was that the safeguard policy must comply to WTO rules; or else, unfair trade transactions were bound to happen.
On thing to be understood was that safeguard was the last resort in tackling import pressures from abroad. In international trade relationship, a country who exercised safeguard was rated as having serious problem at home. Their competitiveness weakened against other countries so they had to withstand invasion of imported products.
In that case what must be done was to strengthen competitiveness of local products to face regional or global competition. Entry of lemon products from China was a clear example when it was known that the fruit from China was cheaper by price compared to local fruits like Pontianak lemon. This was because transportation cost from China mainland to Jakarta was cheaper than Pontianak Jakarta route.
Meaning, what needed to be tidied up were logistics, connectivity, transportation, and delivery time. If these points could be managed well, prices of local fruits would be competitive against those from China. So it was unwise to make excuses when all the trouble originated from own weaknesses. As an Indonesia proverb had it “To blame the floor for not being able to dance”. To put the blame on others was an unproductive and dangerous act.
What must be done was to identify one’s continuous improvements. Never give up easily, sand take a short cut solution by opening the import valve. In the short run, a measure as such was permissible for stabilizing prices and to control inflation. But be warned, a widely opened import valve would injure national producers from upstream to downstream.
Finally before reviewing FTA supposedly the government and business people sit together to pinpoints the plus point and minus point of domestic products. In case of minus point, improvements would be imperative. All parties needed not to blame each other as such would be unproductive and counter productive instead. It would be wiser for all parties to meet and dissect the FTA case toward win solution.
Amidst the world’s uncertain economic condition, it was necessary to see prospective acts in disguise by developed or developing nations to protect their own domestic market through various masquerades with the final objective of closing access for foreign products. The government and business players better be cautious in responding to this matter. (SS)

Business News - June 07,2013

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