http://www.thejakartaglobe.com/home/scandals-politics-distracted-indonesia-from-coping-with-china-asean-fta/360110
February 22, 2010 Dewi Kurniawati Instead of doing its FTA homework, Indonesia has been hooked on political dramas like the investigation of the Bank Century bailout, critics say. Scandals, Politics Distracted Indonesia From Coping With China-Asean FTA As much of Southeast Asia prepared for the Asean-China Free Trade Agreement that took effect on Jan. 1, government leaders in Indonesia were consumed by an array of sensational scandals. The result, critics say, was a stunning lack of leadership and a scattered response as the effects of the trade deal became apparent and imminent. Even weeks after the deal took effect, the government was divided about what to do, sending out confusing and conflicting messages. Would the country seek to renegotiate? Should it? It depended on who you asked. Meanwhile, cheap Chinese goods were being loaded onto ships headed for Indonesia and Indonesian manufacturers and their employees braced for pain. "I think the government could have done better preparing and publicizing this agreement, including the consequences it will bring. Instead, our attention was consumed by daily politics: the geckos-versus-crocodiles saga, the Antasari [Azhar] case, and now the [Bank] Century drama," said Sofyan Wanandi, chairman of the Indonesian Employers Association (Apindo). "If we had done our homework, we wouldn't be startled like we are today." Alexander Chandra, a Southeast Asia coordinator for the Trade Knowledge Network, a Canada-based think tank specializing in trade, said the country is paying a heavy price for getting bogged down in political warfare. "We ignored the challenges from the outside because we have been occupied by daily politics," Chandra said, shaking his head. "Can you imagine that our Ministry of Industry only began to warn [manufacturers] about this six months before the actual implementation?" Of course, the trade deal should not have come as a surprise to anyone. Trade Minister Mari Elka Pangestu signed the deal in 2004, after years of negotiations. It was clear that it would establish the world's third-largest free-trade area, after the European Union and the North American Free-Trade Agreement, connecting 1.9 billion people with a combined GDP of $6.6 trillion. More to the point, it would eliminate import tariffs on about 90 percent of Chinese products, posing a huge challenge to manufacturers and a serious threat to the country's workforce. Chandra said other Asean countries, such as Thailand, Malaysia and the Philippines, were braced for the deal, while Indonesians quarreled. "The difference is, unlike Indonesia, other nations in Asean eventually did their homework and prepared for this competition," he said. Chandra said the government failed to prepare domestic companies, especially small-scale manufacturers and their employees to compete with the onslaught of Chinese imports and to mitigate those effects that could not be avoided. This lack of preparation led to predictable finger-pointing when reality finally set in. Industry leaders blamed the government for not informing them sooner. Some called for the deal to be renegotiated. Others said it was time to adapt. The government, meanwhile, blamed industry leaders for not expressing their concerns over the deal earlier. "This agreement was signed years ago. And I told the industry players about this. But somehow they just realized the impacts later," Mari said. "If only they [the government] would have listened to us from the beginning," Sofyan responded. Finally, earlier this month, Industry Minister MS Hidayat, a proponent of renegotiating, said the government had officially informed the Asean Council of its desire to renegotiate some elements of the deal. It would seek to delay implementation of tariff cuts on 228 categories of products in exchange for acceleration of cuts in other categories. What happens next? The Asean Council has 180 days to decide whether to try and renegotiate with China. Meanwhile, some Indonesian business leaders are looking forward with optimism. Eddy Widjanarko is among them. The chairman of the Indonesian Footwear Association, Eddy said that the trade deal would likely force his industry to lay off as much as 20 percent of its 3 million employees nationwide. But it will also force shoe manufacturers to become more competitive, he said. "I don't understand why people always talk about the negative side of this agreement. If we do this correctly, I am optimistic that within 10 years we will export Indonesian shoes to China," he said. Sure it would be better if inputs from businesses and industries were taken into more consideration by the government. But now we can't go back, so I think we might as well fight this battle." Eddy's optimism is shared by Chandra. "We know what the problem is," Chandra said. "It is now time to focus on this as a nation and find a way out together. If we renegotiate, we will continue the habit of being spoiled and we will never learn what competitiveness means." Sofyan offered a more pointed suggestion. "At the end of the day, we need strong leadership. This ongoing political chaos is because we lack leadership in this country," Sofyan said. Related articles Indonesia's Industry Groups, Government Dozed as China Trade Pact Neared: Critics 8:45 PM 06/01/2010 Asia Watch: Lack of Bond Market Holding China Back 7:40 PM 18/02/2010 Indonesia Gives Out Mixed Signals on China FTA 9:29 PM 15/01/2010 Agriculture Ministry Seeks Ways To Stem 'Flood' of Chinese Imports to Indonesia 8:10 PM 12/01/2010 Indonesian Duty Revenue Plunges as China FTA Takes Effect 9:33 PM 08/01/2010 [Non-text portions of this message have been removed]
