Indonesia Gives Out Mixed Signals on China FTA

By webadmin on 11:01 pm Jan 15, 2010
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Irvan Tisnabudi, Dion Bisara & Yessar Rossendar

The government remained committed to the free-trade agreement with China and a letter sent to the Asean Council was only a “notification” of potential problems in a number of sectors, not an official request to renegotiate the pact, as previously indicated, a senior Trade Ministry official said on Friday.

However, two government officials told the Jakarta Globe that the cabinet was divided over the issue, with Industry Minister M S Hidayat in favor of renegotiating and Trade Minister Mari Elka Pangestu opposed to it.

Mari has several times declined to confirm that a formal request for renegotiation had been sent to the council. She told Agence France-Presse on Friday that she had only “informally discussed” the sensitive tariff categories with Asean.

Two government officials who were present at a limited cabinet meeting last week told the Jakarta Globe on Friday that “Mari showed firm reluctance to renegotiate the agreement.”

The officials, who asked not to be named, said Mari was involved in a heated debate with Hidayat at the meeting. Mari told Hidayat, who expressed support for renegotiating the pact, that the government should not try to back out of a deal it had already signed, the officials said.

Amid strong pressure from domestic manufacturers, who are worried that an onslaught of cheap Chinese imports will would hurt their businesses, the government in recent weeks has sent mixed signals about whether it would seek to renegotiate parts of the Asean-China Free Trade Agreement, which took partial effect on Jan. 1.

On Jan. 4, Coordinating Minister for the Economy Hatta Rajasa said the government had notified the Asean Council of its intention to seek new negotiations on 228 tariff categories in eight industrial sectors.

“We have sent notification for a renegotiation with Asean and China regarding the agreement because it has the potential to weaken local industries,” he said.

A Trade Ministry official earlier said the letter was sent on Dec. 31.

However, Asean secretary-general Surin Pitsuwan told Agence France-Presse on Thursday that the Trade Ministry had only sent the Asean Council a letter expressing “difficulties” in complying with the agreement. He said the letter made no direct appeal for action to renegotiate the pact.

Addressing the contradiction, Gusmardi Bustami, director general of international trade cooperation at the Trade Ministry, said on Friday that the letter sent on Dec. 31 was only a letter of notification, “which explains that a number of industrial sectors [in Indonesia] may have trouble with the free trade agreement.”

The letter said Indonesia “remained committed to carry on with the pact,” Gusmardi said.

When asked about what government officials had meant when they talked earlier about “renegotiating,” Gusmardi said, “About renegotiations, there are some phases and procedures that we have to go through.”

He declined to explain whether the letter was meant as the first stage of seeking modifications to the agreement.

Anggito Abimanyu, the Finance Ministry’s head of fiscal policy, said on Friday that there were stages to renegotiating the trade deal.

“We will leave all efforts at renegotiating to the Trade Ministry,” Anggito said.

The mixed signals from the government prompted anger from Nasril Bahar, a lawmaker from the National Mandate Party (PAN) who is a member of the House of Representatives Commission VI, which oversees trade and industry.

“I don’t see there is a serious intention [by the government] to renegotiate. We don’t know why the government, especially the trade minister appears very slow, in doubt, or felt embarrassed to do so,” Nasril said on Friday.

“If they still move that slowly, we will see our industries buried alive and we will chase them [the government] to be held responsible for that,” he said, adding the House may summon government officials to explain its stance on the free-trade agreement.

Mari, Hatta and Hidayat were all unavailable for comment on Friday.