Indonesia Wants to Delay China-ASEAN Pact

Posted by Reading Time: < 1 minute

Jan. 14 – The Indonesian government has formally lodged a letter to the Association of Southeast Asian Nations (ASEAN) asking for the group’s free trade pact with China to be delayed to January 2011.

The deal began this month; imposing zero tariffs on around 90 percent of imported goods including textiles, steel and chemicals. Indonesia argues this will be devastating for its industries already struggling with competition from cheap Chinese imports. A spokesman for Indonesia’s Industry Ministry told The Wall Street Journal: “We want to slow down the pace of this agreement so we are ready domestically.”

The trade pact between China and ASEAN is the third-largest free-trade area in the world worth an estimated US$200 billion. It will allow China easier access to raw materials in the region as well as allow ASEAN members to explore the Chinese market.

Indonesia, Malaysia, Brunei, the Philippines, Singapore and Thailand will be the first members to do away with the tariffs followed eventually by Laos, Vietnam, Cambodia and Myanmar which have until 2015 to follow suit.

Textiles, footwear and steel products in Thailand, Vietnam, Cambodia and Indonesia will be the most affected industries when tariff-free Chinese products roll in. According to newspaper Bisnis Indonesia, the customs and excise unit said the agreement could lead to state losses of 15 trillion rupiah (US$1.61 billion) in 2010.

Countries are allowed to list 150 and 250 sensitive goods that can be excluded from the zero tariff agreement. It is unlikely that Indonesia’s request for a delay in implementation will hinder the trade pact since it will need approval from other 9 ASEAN members plus China.