Reuters
Jakarta: Indonesia may lodge a formal request with Southeast Asian neighbours to delay some tariff reductions under a free trade agreement with China, a trade ministry official said on Monday.
The pact between China and the 10-member Association of South East Asian Nations (Asean) forms a trade bloc worth $200 billion affecting 1.9 million people, making it the world's biggest trade deal by population and third largest by trade volume after the European Economic Area and the North American Free Trade Zone.
The agreement, which should help China secure supplies of raw materials and open new markets for Asean countries, was initially signed in 2002 and covers around 7,000 product lines. It came into force this year.
But Indonesia has led resistance after sectors such as textiles and garments complained that the agreement left the industries vulnerable to cheap Chinese imports.
Iman Pambagyo, director of regional cooperation at Indonesia's trade ministry, said Jakarta was considering asking for implementation to be delayed in some sectors.
"It has been discussed among the ministers and will be brought to the president soon. The cabinet decision will be in January, I am confident about that," said Paymbagyo.
Indonesia's coordinating minister for the economy, Hatta Rajasa, said on Monday that a letter had been sent to Asean seeking "further discussion" of its obligation to reduce tariffs.
Trade minister Mari Pangestu declined to comment.
Rajasa said last week that a team had been set up to investigate whether the pact would damage the economy.
"If it's unfair, we can reject it. We'll do something to protect our national interest," he said without elaborating.
Under the pact, Indonesia, Malaysia, Brunei, the Philippines, Singapore and Thailand have to reduce to zero tariffs on around 90 percent of imported goods. Laos, Vietnam, Cambodia and Myanmar have up until 2015 to make the cuts.
Manufacturers of goods such as textiles, footwear and steel in countries such as Thailand, Vietnam, Cambodia and Indonesia appear vulnerable to cheap Chinese imports.
But each country also has a list of between 150 and 250 goods that can be excluded and certain goods are deemed as sensitive, ranging from some electronics to an eclectic list such as the import of black pencils into Indonesia or snuff into Malaysia, and will continue to be protected.
Ahmad Tirmiko Indra, of Asean's External Economic Relations Division, said that checks would soon be started to ensure signatories to the agreement had complied. He did not elaborate on the potential impact of a country seeking delays now.
Indonesia's customs and excise unit has warned the agreement could cause the state losses of 15 trillion rupiah ($1.61 billion) in 2010, Bisnis Indonesia reported on Saturday.
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