Thursday, 17 October 2013


The World Trade Organization [WTO] axed growth projection percentage this year to become 2.5% of the estimated 3.3% in April 2013. Export and import performance of the developed nations and developing nations were the underlying calculation for this projection beside other supporting data.

According to WTO, demand for import in developing countries although admittedly increasing was progressing in lesser speed than expected. The condition was rated as holding back export growth of developed and developing nations in the first half of 2013.

Besides, consumption level, trading growth, and unemployment Uni European states were predicted no to descend significantly from the present level. Uni Europe consumed one third of the goods traded in the world. However, WTO also noted debt crisis in Uni European states was reduced significantly since last year.

In their latest prediction, WTO projected world’s trading commodities grew by 2.5% in 2013. Meanwhile export would increase by 1.5% in developing nations. On the contrary growth of import in advanced states would stagnate at around 0.1%. Meanwhile in the developing countries import was predicted to increase by 5.8% through 2013.

In 2014 WTO predicted global trading would grow by 4.5% with export increasing by 2.8% in developed countries and 6.3% in developing countries. Next year import growth among developing countries would increase to 3.2% while import in developing countries would also increase to 6.2%.

Although slowdown in trading was mostly caused by macro economic turbulence, there were strong indications that protectionism was playing its role and was now taking its different shape which was hard to detect. Some countries were allegedly exercising protectionism in disguise to protect their national interest.

Some developing countries were striving hard to urge developed countries to open their domestic market so products from developing countries could enter the markets of developed countries. Only trouble was, crisis in the developed countries made it difficult for them to the developing countries.

China was one of the emerging countries which was deeply affected by world’s economic slowdown. Demand for commodities from China by European states dropped drastically in the past 2 years. Only trouble was that around 70% of China’s GDP was contributed by export. So when export slumped, the Government of China aimed their export-ready goods to the domestic market or to other emerging markets in Asia.

Stimulus in vast magnitude was injected by the Government of China to keep their domestic economic machine rolling. The Government of China feared the possible economic slowdown at is might smash the employment sector. The sizable number of joblessness in China, around 8% of the 1.6 billion population was certainly most undesirable as it might trigger massive social outburst.

That was the reason why projection of China’s economic growth this year was axed to 7.5% after succeeding to grow by 7.8% last year. In the first three quarters of this year, the average growth percentage in China was around 7.6% per quarter.

It seemed understandable that economic slowdown in China generated pressures on export volume from the emerging markets including Indonesia. In the fast few years, trade balance between Indonesia and China always posted surplus on the side of China. Indonesia’s export to China dropped by volume and value. On the contrary import of raw materials and auxillary materials from China was increasing steadily the result was deficit on Indonesia.

In general WTO concluded that the slow growth of world’s trading over the past 2 years encouraged countries to enhance multilateral agreements; small wonder why bilateral and multilateral trade agreements heightened lately. The only thing was, amidst pessimism of economic growth, there was tendency of countries to review the Free Trade Agreement in the event that one of the countries feel they were disadvantaged by the agreement.

Indonesia is one of the countries which constantly threw a discourse to review FTA in terms of financial and economic benefit in the long run. Since the FTA era in the past 3 years, national businesspeople admitted they were not enjoying any benefit from trade agreements which was indicated by export being always less than import.

The highlight of polemic today was on China Asean Free Trade Agreement [CAFTA]. This agreement brought blissfulness to China but misfortune  on Asean, particularly Indonesia the reason was because the Government and business players of China were by far more ready for the game than their Asean counterparts.

Various distinctions of China’s products made them seem cheaper than Asean products. High operational efficiency of companies in China, supported by the right stimulus by the Government made their product highly competitive. It seemed reasonable that China was able to score surplus in bilateral or multilateral agreement.

To Indonesia, the disadvantageous situation should be pondered carefully. Even if the multilateral agreement were hard to review as it would be time consuming and energy draining, bilateral FTA could still be reviewed in this case the Government must prepare a strategy and proposed conditions acceptable to the participating countries. It was also necessary to prepare skillful negotiators to troubleshoot trade disputes and handle other irregularities.

The point was that review of bilateral FTA was necessary to keep national interest from being scarified economically, socially and politically. In this case the AEC which would be effective on January 1, 2016 for the non-financial sector must really be re-verified in terms of readiness. Let there be no disharmony where the Government claimed to be ready but the businesspeople were not.

The same step was necessary for the financial sector to be effective by 2020. In the remaining period which was the time FTA in non-financial sector and financial sector [2020], the Government and business players must share the same vision, mission and strategy in implementing the AEC 2015/2020. The change of Government in October next year must not pose as hindrance to preparing for AEC 2015-2020.

While improving the quality of agreement, the Government and national business players must also keep up with trading development of the world which was predicted to recover by 2015. At that time the new cabinet would be entering the first year of office which was expected to be better than before. Hopefully so.

Business News - September 27, 2013

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