Economy

China-ASEAN FTA works on win-win for all

By Ding Qingfen (China Daily)
Updated: 2011-05-24 09:05

BEIJING - Indonesia stands to benefit from the implementation of the China-ASEAN free trade agreement (FTA) with easier access to more deals in new markets for its manufactured products and raw materials, contrary to views that the FTA is hurting the local economy, said a senior official from China's Ministry of Commerce.

"The problems (of unemployment and dropping sales) should be attributed to the weak competitiveness of their own industries, rather than the impact of the China-ASEAN FTA," Jiang Jiqing, director of Department of International Trade and Economic Affairs said.

She was responding to a recent article published by Kompas, Indonesia's largest daily newspaper, which alleged that the China-ASEAN FTA has led to lower profits and prompted job losses in Indonesia's five major industries - electronics, furniture, metal, mechanicals and textiles.

"The FTA has created more benefits than problems, and also, the benefits will be lasting," she added.

Related readings:  ASEAN to explore internal coordination mechanism to promote peace  China, ASEAN to seek financial cooperation  ASEAN becomes Hainan's 2nd largest trade partner  China to offer 200,000 tons of rice for ASEAN plan

Critics from Indonesia's commercial circle claimed that the China-ASEAN FTA choked some Indonesian industries and squeezed profits. They are demanding changes in the details of the agreement under the FTA framework.

"Such complaints are not substantiated. The textile and light industries do not have strong competitiveness. What has happened to these businesses has nothing to do with the FTA," said Jiang,

"It's impossible to make changes to the FTA agreements, as the FTA also involves other ASEAN nations."

Mari Elka Pangestu, Indonesia's minister of trade, said recently that it is impossible for further negotiations on any changes to the FTA, adding that the Indonesian government could increase import tariffs on specific industries.

In January 2010, the China-ASEAN free trade area, the largest free trade area in terms of population, was established. Under the terms of the agreement, tariffs on exports and imports will be gradually reduced among China and the 10 ASEAN nations, including the lifting of investment barriers.

Indonesia's exports to China increased to $20.75 billion in 2010 from $9.61 billion in 2006, with an annual growth rate of 21 percent, 6 percentage points higher than the growth of the ASEAN nations' exports to China during the same period.

According to Jiang, "non-crude oil and non-natural gas products saw rapid growth in exports", with the annual growth rate reaching 24 percent from 2006 to 2010.

Indonesia has rich natural resources including coke, cocoa powder and palm oil. These are included as non-crude oil and non-natural gas goods.

In 2010, exports of these products reached $14.1 billion, and China overtook the United States to become Indonesia's second-largest export destination for non-crude oil and non-natural gas goods, after Japan.

Chinese investment in Indonesia has also been on the rise. By the end of 2010, more than 1,000 Chinese companies had cumulatively invested $6 billion, creating 30,000 jobs, in the country. The investments were mainly in the infrastructure and energy sectors. China ranked the 13th in terms of foreign direct investment in Indonesia, according to official data.

Indonesia's Vice-President Boediono has urged more inflows of Chinese investment to the nation, especially in the manufacturing sector, to help strengthen the competitive edge of Indonesian industries.