Kadin sees opportunity in ASEAN-Korea free trade deal

Linda Yulisman, The Jakarta Post, Jakarta | Fri, 12/09/2011 8:47 AM A | A | A | - Klipping the Jakarta Post

Full implementation of the free trade agreement with South Korea next year would pose no serious problem to local products, as no head-to-head competition was expected, a trade organization has said.

The head of the Indonesian Chamber of Commerce and Industry’s (Kadin) standing committee on investment, human resource development and small and medium enterprises, Utama Kajo, said on Thursday that because most goods imported from South Korea would not compete directly with local goods, the trade treaty would not harm local industries.

“We import a lot of high-technology goods from Korea and our products will not compete head-to-head with theirs,” he told The Jakarta Post.

Kajo said that, unlike Chinese goods, Korean products were relatively more expensive compared to locally manufactured products, including food and beverages marketed to middle- and upper-class segments of society.

“We have the opportunity to increase our exports to Korea, but it now depends on our local producers to benefit from the free trade scheme,” he explained.

The ASEAN-China free trade agreement, which came into force in January 2010, was much criticized as it caused an influx of cheap Chinese goods into the local market. The free trade agreement hurt many small- and medium-scale companies as they could not be able to compete against such cheap products.

ASEAN and Korea signed a free trade in goods agreement in August 2006, which came into force in June 2007. The free trade treaty will be fully implemented next year.

Currently, more than 81 percent of traded goods, or 90 percent of total items in the normal track, including electric and electronic components, textiles and apparel and plastic products, are duty free; this arrangement will be expanded to 90 percent of traded goods by 2012.

Trade Ministry data shows that Indonesia’s trade with Korea has grown significantly since the implementation of the agreement. In 2007, Indonesia’s exports to Korea, which totaled US$7.58 billion, jumped to $12.57 billion in 2010, while imports rose from $3.19 billion in 2007 to $7.70 billion in 2010. As of September this year, exports stood at $11.88 billion, while imports totaled $9.31 billion.

Indonesian Textile Association (API) chairman Ade Sudrajat said the extension of a duty-free facility for traded goods would not hurt local industries, as Indonesian and Korean goods were much more complementary. Most Korean textile and garment products were also more expensive than local products and were aimed at higher echelons.

“We have the opportunity to further increase our textile exports to Korea, as we have seen over the past two years,” he said, referring to a 50 percent growth of textile exports to the country, adding that exports might double in the future due to an expansion in tariff removals.