Govt urged to reap economic gains, boost leverage from China ties

Abdul Khalik, The Jakarta Post, Jakarta

Lawmakers and businesspeople are urging the Indonesian government to come up with a practical strategy to reap full economic and diplomatic benefits from its relationship with China.

 A member of House of Representatives Commission XI overseeing financial affairs, Dradjad Wibowo, said relations with China promised huge benefits for Indonesia, but the country was ill-prepared to realize them.

 “China has a huge economy and market for us. Besides being in dire need of natural resources and energy to support its economy, the country is also hungry for almost any other product, including fertilizer for its agricultural sector,” he told The Jakarta Post on Monday.

 “However, we don’t have the capacity to fill the market with our products. The free trade agreement will only benefit China and other ASEAN countries that have that capacity.”

 China hosted leaders of the Association of Southeast Asian Nations (ASEAN) in Nanning on Monday to commemorate 15 years of relations and to affirm ties for the future.

 They are renewing their commitment to establish a China-ASEAN Free Trade Area by 2010. The trade zone would have a combined population of nearly two billion and a gross domestic product of over US$2 trillion.

 Dradjad, who represents the National Mandate Party (PAN), argued that while Indonesia had achieved a surplus in its bilateral trade with China, it needed to diversify its exports to rely less on natural resources, oil and gas.

 “Our exports to China mostly benefit a few people who have a lot of capital, including businesspeople in the natural resources and energy sectors. We have many other labor-intensive industries such as fertilizer, metal, pulp and paper, and furniture that should be upgraded so that we can compete internationally and export the finished goods to China,” he said.  

 Dradjad said the government should help industry cope with current trade conditions. He argued Indonesia had all the raw materials needed to support industry, but China had flooded Indonesia with cheap furniture and metal products that threatened domestic businesspeople.

 Businessman Anton J. Supit agreed businesses here have struggled to compete internationally. He said Indonesia must analyze the Chinese market and apply specific strategies to penetrate it as well as to attract investments.

 “We need to produce goods that are complementary, not competitive, with China’s products, such as rubber, palm oil, agricultural products, and fish, and boost our tourism industry, since many Chinese are eager to visit Indonesia,” Anton, one of the chairpersons of the Association of Indonesian Employers, told the Post.    

 While he concurred that Indonesia could gain huge trade benefits from China, Amris Hassan, a member of House Commission I on security and international affairs, said the Chinese government and business sector had also showed considerable interest in investing in Indonesia.

 “China is more aware of the historical attachment than we are. They really want to make big investments here to maintain and increase the ties. However, we are the ones who are not ready to receive those investments,” he said.     

 Dradjad added that China could be a huge investor in Indonesia with its mammoth foreign exchange reserves of more than US$900 billion.

 Amris said close relations with China were the only balancing move left against the U.S.-Japan alliance.

 “China is the biggest country in East Asia while Indonesia has the largest economy in Southeast Asia. I think we will raise our leverage against the U.S. and Japan if we foster closer ties with China,”
he said.

 Dradjad said this leverage could be used, for instance, to renegotiate Indonesia’s debt with Japan, which has grown to more than $25 billion or one-third of Indonesia’s total debt. He said Japan now felt threatened by China’s rising economic power.