Recent Development of ASEAN's Economic Relationship with China and India

Recent Development of ASEAN's Economic Relationship with China and India

By: Hendri Saparini, Ph.DManaging Director

ECONIT Advisory Groupsaparini@econit.co.id

IDEAs WorkshopNew Delhi, 5-6 November 2009

Presentation Outline

• Economic characteristics and its development of ASEAN members, China and India.

• ASEAN China Free Trade Area (ACFTA) and ASEAN India Trade in Goods Agreement (TIG): The Basic Agreement and Current Development

• Trade and Investment between Indonesia – China and Indonesia – India, and their impacts on Indonesian economy.

Introduction

• ASEAN is very aggressive to enter into a Free Trade Agreement (FTA). In fact, the country members of ASEAN have not all been ready to commit in such FTA.

• A review on ASEAN-China and ASEAN-India FTAs is very crucial as ASEAN will have to deal with two economic giants, not to mention that they are highly competitive.

• A review on Indonesia, as one of ASEAN members that has huge economic potentials, is expected to give significant result in form of relationship development pattern, as well as the potential benefit and negative impact from the economic integration on process.

List of ASEAN Free Trade Agreements

AGREEMENT SIGNING DATE EFFECTIVE

ASEAN-Australia-New Zealand Free Trade Area (AANZFTA)

27 February 2009 Preparations are currently being undertaken for the ratification and the subsequent implementation of the Agreement by the parties

ASEAN-China Free Trade Area (ACFTA)

November 2002 The realization of ACFTA in 2010 for Brunei Darussalam, Indonesia, Malaysia, Philippines, Singapore, Thailand and China, and 2015 for Cambodia, Lao PDR, Myanmar and Viet Nam.

ASEAN-India Trade in Goods (TIG) Agreement

13 August 2009 The ASEAN-India FTA will see tariff liberalisation of over 90% of products traded between the two dynamic regions. Tariffs on over 4,000 product lines will be eliminated by 2016, at the earliest. The ASEAN-India TIG Agreement will enter into force on 1 January 2010 once India and at least one ASEAN Member State notify completion of their internal ratification process.

ASEAN-Japan Comprehensive Economic Partnership (AJCEP)

April 2008 The Agreement entered into force on 1 December 2008. As of July 2009, Brunei Darussalam, Lao PDR, Malaysia, Myanmar, Singapore, Thailand, Viet Nam and Japan have ratified the Agreement.

ASEAN-ROK Framework Agreement on Comprehensive Economic Cooperation

13 Dec. 2005 The Framework Agreement provides for an ASEAN-ROK Free Trade Area by the year 2008 (with flexibility to 2010) for ROK, 2010 (with flexibility to 2012) for Brunei Darussalam, Indonesia, Malaysia, Philippines, Singapore and Thailand, 2016 for Viet Nam and 2018 for Cambodia, Lao PDR, and Myanmar.

Countries Economic Characteristics: ASEAN Needs to Define A Better Strategy

• China is an economic giants to ASEAN

• GDP and Foreign Reserve of China are far above those of ASEAN members

• Trade structure between China and ASEAN members show that Chinese products are highly competitive

• Almost all ASEAN members face trade deficit against China

• Chinese attractiveness for foreign investment is above that of ASEAN members in average.

Economic Growth:ASEAN Behind China and India

-15

-10

-5

0

5

10

15

20

Perc

ent

ChinaIndiaIndonesiaASEAN-5

Source: IMF

GDP Comparison:ASEAN’s GDP only 34% of the Chinese (2008)

5.3

11.2

14.6

27.2

89.8

168.6

181.9

222.2

273.2

511.8

1,209.7

4,401.6

0 500 1000 1500 2000 2500 3000 3500 4000 4500

Lao PDR

Cambodia

Brunei Darussalam

Myanmar

Viet Nam

Philippines

Singapore

Malaysia

Thailand

Indonesia

India

China

Billions of USD

Source: 2008 figure, IMF

GDP Structure:ASEAN members, China and India

20.1

36.1 41.0 45.254.7 54.8

60.967.3 71.1

20.8

13.510.7

12.5

11.6 11.98.4

6.29.7

12.9

44.430.9 19.1

39.728.8 27.8

41.115.2

39.8

8.019.1

23.1

-5.3

2.8 1.1

-16.5

-1.8

-20

0

20

40

60

80

100

120

Brunai China Singapore Malaysia India Thailand Indonesia Vietnam Philipina

Per

cent

Private consumption Government consumption Gross domestic capital formation Net Export

Source: ADB

High Growth of FDI in China:Impact of Economic Reform

(20)

-

20

40

60

80

100

120

Billi

on U

SD

China

ASEAN

Indonesia

India

Source: UNCTAD

FDI Inflow (1998-2008): China is far Above ASEAN

Source: UNCTAD

1.0

3.3

3.7

8.4

17.4

20.3

29.2

33.5

47.8

75.3

190.0

396.4

677.2

0 100 200 300 400 500 600 700

Lao People's Dem. Rep.

Myanmar

Cambodia

Brunei Darussalam

Philippines

Indonesia

Vietnam

India

Malaysia

Thailand

Singapore

ASEAN

China

Billion USD

Exports and Import:Huge Surplus of China’s International Trade

Source: Asean Economic Community Chartbook, 2008

0.8

4.4

6.6

8.8

49.0

61.8

137.0

175.0

194.5

241.4

187.4

879.3

1428.5

0 200 400 600 800 1000 1200 1400 1600

Lao PDR

Cambodia

Myanmar

Brunei Darussalam

Philippines

Viet Nam

Indonesia

Thailand

Malaysia

Singapore

India

ASEAN

China

Billions of USD

Exports

Imports

Top 5 ASEAN Exports to China:Dominated by Electonics Parts and Primary Commodities

Automatic data processing machines; optical reader, etc, 7%

Others, 58%

Natural rubber, balata, gutta-percha

etc, 6%

Petrolium oils, not crude, 6%

Palm oil & its fractions, not

chemically modified, 5%Electronic integrated

circuits and microassemblies, 18%

Source: Asean Economic Community Chartbook, 2008

ASEAN Commodities Export to China: Main Source for China’s Demand , 2008

99.9

97

94.8

91.8

89.9

86

84.1

82.9

77.3

76.9

76.7

76.6

75 80 85 90 95 100

Uranium or thorium ores & concentrates

Slag. Dross other than granulated slag

Iron ores & concentrates; including roasted iron pyrites

Alumunium ores & concentrates

Chromium ores & concentrates

Zirconium & articles thereof, including waste & scrap

Iron oxides & hydroxides

compounded rubber, unvulcanised, in primary forms

Ores & concentrates, nes

Zinc ores & concentrates

Niobium, tantalum, vanadium ores & concentrates

Marble,travertine, ecaussines etc

Percent

Source: ASEAN Economic Commonity Chartbook 2009

5 Top ASEAN’s ImportASEAN from China, 2008

Others, 76%

Hot rolled, flat-rolled products of

iron or nonalloy steel, 2%

Automatic data processing

machines; optical reader, etc, 5%Electronic

integrated circuits and

microassamblies, 5%

Parts & acces od computers & office

machines, 6%

Electric app for line telephony,

including current line system, 6%

Source: ASEAN Economic Commodity Chartbook, 2009

Country Commodity Share of total export (%)

Brunei Darussalam Crude petroleum oils 99.80%

Cambodia Palm oil & its fraction 88.80%

Myanmar Dried vegetables, shelled 61.70%

Indonesia Palm oil & its fraction 57.40%

Malaysia Crude petroleum oils 39.70%

Singapore Petroleum oils, not crude 22.20%

Viet Nam Coal; briquettes, ovoid & similar solid fuels manufactured from coal

21.68%

Philippines Parts & access of motor vehicles 18.90%

Thailand Petroleum oils, not crude 6.40%

Source: ASEAN Secretariat Office

Main ASEAN Countries’ Exports to India:India Dependent for Raw Materials (2008)

ASEAN Imports from India (2008)Why being dominated by Petroleum Oils?

Others, 54%Petrolium oils, not

crude , 31%

Electric app for line telephony,

including current line system , 3%

Refined copper and copper alloys,

unwrought, 3%Soybean oilcake & other solid residue, 4%

Diamonds, not mounted or set,

5%

Source: ASEAN Economic Community Chartbook 2009

ASEAN trade with China:Continuous increase of deficit

-0.9 -1.7 -4.3 -2.0 -2.7 -4.0 -2.9 -3.7 -1.5 -6.4 -8.9 -9.9-15.2

-21.4-40

-20

0

20

40

60

80

100

120

1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008

Billi

on U

SD

Import

Export

Balance of trade

Source: ASEAN Statistical Yearbook, 2008

ASEAN - India Trade:Surplus with Value Added?

0

5

10

15

20

25

30

35

19951996

19971998

19992000

20012002

20032004

20052006

20072008

Billi

on U

SD

Export

Import

Balance of trade

Source: ASEAN Statistical Yearbook, 2008

ACFTA: Gates to Liberalization

• ACFTA was agreed in November 2002. Both sides have targeted the realization of ACFTA in 2010 for Brunei Darussalam, Indonesia, Malaysia, Philippines, Singapore, Thailand and China, and 2015 for Cambodia, Lao PDR, Myanmar and Viet Nam.

• Under the ACFTA, tariffs on certain products as known as the Early Harvest Program (EHP), were reduced before the onset of the FTA (came into effect on 1 January 2004).

• Others agreements by sectors have also been agreed under ACFTA.

Agreements Under ACFTA #1

• The ASEAN-China MOU on Strengthening Sanitary and Phytosanitary (SPS) Cooperation was signed in November 2007.

• ASEAN-China MOU on Agricultural Cooperation in November 2002 in Phnom Penh; a more direct cooperation in the agricultural sector between the lead national agencies in ASEAN and China. An extended ASEAN-China MOU on Agricultural Cooperation for 2007-2011 was signed in January 2007 in Cebu.

• ASEAN and China strategic partnership in Information and Communications Technology (ICT) to promote international cooperation in terms of investment in human resources development on ICT and to explore the possibility of establishing Greater Mekong Sub-region (GMS) information highway.

Agreements Under ACFTA #2

• ASEAN and China cooperation: the MOU on Transport Cooperation in November 2004 in Vientiane, promoting: i) transport infrastructure construction; ii) transport facilitation; iii) maritime safety and security; iv) air transport; v) human resources development; and vi) information exchange.

• The 7th ASEAN-China Maritime Transport Agreement (ACMTA), November 2008 agreed in principle with the Strategic Plan for ASEAN-China Transport Cooperation, identifying transport infrastructure projects aimed at enhancing international and cross-border transportation and facilitation.

Early Harvest Product

Source: ASEANSEC

HS Description

01 Live Animal

02 Meat and edible meat offal

03 Fish, crustacean, molusc, other invrt.

04 Dairy products

05 Products Animal Origin, nes.

06 Live tree and other plant

07 Edible vegetables and certain roots

08 Edible fruits and nuts

Tariff reduction on ACFTA

Agreement on Trade in Goods of the Framework Agreement on Comprehensive Economic Co-operation ACFTA starting on January 1, 2005

X= Applied MFN Tariff Rate

ACFTA Preferential Tariff Rate (Not later than 1 January 05)

2005* 2007 2009 2010

X > 20% 20 12 5 0

15% < X < 20% 15 8 5 0

10% < X < 15% 10 8 5 0

5% < X < 10% 5 5 0 0

X < 5% Standstill 0 0

Average Tariff Applied (2007) * #1

Industry Vietnam India China Thailand Malaysia Indonesia

Agriculture and hunting 20.1% 28.2% 15.9% 21.0% 5.0% 4.8%

Chemicals and chemical products 4.4% 7.9% 11.2% 3.4% 2.1% 4.3%

Coke, petroleum products and nuclear fuel 5.8% 8.2% 7.1% 3.0% 0.1% 3.2%

Electrical and electronic equipment 14.0% 6.0% 14.6% 7.9% 4.4% 5.0%

Food, beverages and tobacco 36.5% 34.1% 21.5% 23.1% 15.2% 10.2%

Forestry and Fishing (PRODUCTS) 20.5% 24.8% 12.3% 10.8% 1.1% 4.7%

Machinery and equipment 7.5% 7.5% 11.5% 6.2% 4.8% 2.7%

Metal and metal products 9.9% 7.2% 9.3% 6.8% 12.2% 7.0%

Mining and quarrying 4.2% 4.9% 4.6% 1.2% 0.7% 3.7%

Mixed goods (trade data) 5.1% 9.1% 9.1% 5.9% 0.6% 6.1%

Source: ITC

*Simple average across all partners countries

Industry Vietnam India China Thailand Malaysia Indonesia

Motor vehicles and other transport equipment 25.4% 18.3% 14.6% 18.8% 10.1% 10.2%

Non-metallic mineral products 25.4% 9.2% 15.9% 7.3% 15.9% 7.5%

Other manufacturing 28.4% 9.6% 20.4% 15.6% 7.8% 10.5%

Petroleum 5.4% 6.1% 2.3% 0.3% 2.0% 3.7%

Precision instruments 11.5% 7.9% 11.9% 5.1% 0.7% 4.6%

Publishing, printing and reproduction of recorded media 22.0% 7.4% 7.2% 8.7% 8.5% 4.4%

Recycling 0.5% 5.8% 2.9% 0.1% 0.5% 1.6%

Rubber and plastic products 19.4% 9.6% 14.2% 10.4% 20.5% 11.6%

Textiles, clothing and leather 41.6% 28.3% 19.2% 13.3% 11.5% 10.5%

Wood and wood products 18.1% 9.4% 8.7% 6.2% 11.4% 4.8%

Average 16.3% 12.5% 11.7% 8.8% 6.8% 6.1%

Source: ITC*Simple average across all partners countries

Average Tariff Applied (2007) * #2

China Financial Aids and Investment: Aggressiveness due to Huge Foreign Reserve

• Investment cooperation fund totaling US$10 billion (infrastructure construction, energy and resources, information and communications)

• Credit of US$15 billion (including loans with preferential terms of 1.7 billion dollars in aid for cooperation projects)

• Special aid of 39.7 million dollars to Cambodia, Laos and Myanmar

• Provide 300,000 tons of rice for to strengthen food security

• Donate 900,000 dollars to the cooperation fund of ASEAN plus China, Japan and the Republic of Korea

• Inject 5 million dollars into the China-ASEAN Cooperation Fund

• Offer of 2,000 government scholarships and 200 Master's scholarships for public administration students

Relationship of ASEAN-China and ASEAN-India

• ASEAN economic is relatively much smaller than China in terms of GDP, which is around 2.9 times of ASEAN’s. It is difficult for ASEAN to compete with China in FTA. Chinese population is 2.3 times ASEAN’s and a very huge market for ASEAN products, but even before FTA ASEAN products can hardly penetrate Chinese market due to lack of competitiveness.

• ASEAN members (excl. Singapore) have similar characteristics, rich of natural resources, but low industrial productivity and competitiveness. This means that they compete each other, rather than complementing. Considering this characteristics, it needs a very hard work to develop AFTA for they are competing in same existing market and not creating a new opportunity.

• ASEAN has already signed a free trade agreement and will be followed by other agreements. ASEAN should develop a joined-marketing strategy to increase their bargaining, for example for CPO, Indonesia and Malaysia are the biggest producers, so they have a very strong position in determining price.

• When ASEAN is able to become a unified economy, then ASEAN will be able to offer an economic cooperation for mutual benefit of ASEAN, China and India. In investment, for instance, it is encouraged to China and India to establish processing industry in ASEAN, so China and India will not only absorb raw materials from ASEAN, but also give higher value added ASEAN.

• Should ASEAN not transform into an economic power, ASEAN would not get more benefit from FTA. Trade and investment after FTA will indeed encourage economic growth, but such growth will not give much value added into the economy. Although exist, value added will only be limited and unable to raise social welfare.

Relationship of ASEAN-China and ASEAN-India

Indonesian Economic Relationshipwith China and India

Indonesian Economic Relationshipwith China and India

China, India dan Indonesia: Different Economic Characteristics

• Chinese GDP showed that investment has the biggest share in GDP, while in China and Indonesia the second of the biggest share in GDP.

• China and India focus on exporting manufactured products, not natural resources materials.

• More competitive industrial sectors has made trade liberalization have more positive impact to China and India, otherwise to Indonesia.

• Export of manufactured products, due to more competitiveness and productivity, has an important role in increasing Chinese and Indian foreign reserves.

GDP Structure:Indonesia, China and India

Source: ADB

Pe

rce

nt

China India Indonesia-20

0

20

40

60

80

100

120

Statistical discrepancyNet Export

Gross domestic capital formation

Government consumption

Private consumption

Manufacture Productivity and Competitiveness Increasing Foreign Reserve of China

500-

-

500

1,000

1,500

2,000

2,500

19801982

19841986

19881990

19921994

19961998

20002002

20042006

2008

Billi

on U

SD

Source: State Administration of Foreign Exchange Bureau of PRC

Economic Reform:Increasing India Foreign Reserve

0

50

100

150

200

250

30019

90

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

Jul-0

9

Billi

on U

SD

Source: Reserve Bank of India

Source: Bank of Indonesia

Indonesia Foreign Reserved:Unstable, Not a Result of Productivity and Competitiveness

2000 2001 2002 2003 2004 2005 2006 2007 20080

10

20

30

40

50

60

Bill

ion

US

D

China’s Export:Focusing on Manufacturing Goods

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

19801989

19911993

19951997

19992001

20032005

2007

Manufactured Goods

Primary Goods

Source: Ministry of Commerce PRC

Primary Product

Source: Reserve Bank of India

India ExportsDominated by Manufactured Goods

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Manufactured goods

Primary products

Indonesian Export:Increasing Shares of Primary Commodity

Source: CBS

2002 2003 2004 2005 2006 2007 20080%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Non Primary Commodity

Primary Commodity

Trade Balance Indonesia-ChinaSurplus for Oil & Gas, Deficit for Non Oil & gas

0.501.71 1.12

(3.61)

0.82

-8

-6

-4

-2

0

2

4

6

2004 2005 2006 2007 2008

Billio

n USD

Balance of trade Oil and gas Non-oil and gas

Source: Ministry of Trade

1.071.83 1.98

3.334.26

-1

0

1

2

3

4

5

2004 2005 2006 2007 2008

Billi

on U

SD

Balance of trade Oil and gas Non-oil and gas

Source: Ministry of Trade

Indonesia-India Trade Balance Surplus for Non-Oil & Gas, Mainly Raw Materials

Top 10 Exports Indonesia to ChinaDominated by Natural Resources (2008)

Source: CBS

203.6

210.2

230.9

337.0

716.4

742.3

859.1

1,188.8

1,519.3

2,469.0

- 500.0 1,000.0 1,500.0 2,000.0 2,500.0 3,000.0

Aluminum ores and concentrates

Copper wire

Nickel ores and concentrates

Coconut (copra)

Coal

Chemical wood pulp,

Natural rubber,balata,gutta-percha etc

Crude petroleum oils

Palm oil & its fraction

Petroleum gases

Million USD

Palm oil & its fraction, 58%Coal, 17%

Others, 14%

Binders for foundry molds or cores, 2%

Petroleum coke, 1%

Chemical wood pulp, 1%

Natural rubber, 1%

Coconut (copra), 2%

Copper ores and concentrates, 4%

Source: CBS

Top 10 Exports Indonesia to IndiaDominated by Natural Resources, too (2008)

Top Imports Indonesia from China (2008)Mostly Manufactured Products, but Agricultural, too

Source: CBS

81

83

85

87

90

92

93

99

121

125

138

145

147

151

155

181

194

306

- 50.00 100.00 150.00 200.00 250.00 300.00 350.00

Tobacco

Apples, Fresh

Mandarins (Including Tangerines And Satsumas), Fresh Or Dried

Antennas And Antenna Reflectors

Parts For Machinery Making Or Finishing Paper Or Paperboard

Flat-Rolled Products Of Iron Or Non-Alloy Steel

Steam And Other Vapour Turbines

Parts For Auxiliary Plant For Use With Steam

Petroleum Oils And Oils From Bituminous Minerals, Crude

Parts And Accessories Of Motorcycles

Disodium Carbonate

Superphosphates Fertilizers

Aluminum Nonalloyed Rectangular

Garlic, Fresh Or Chilled

Auxiliary Plant For Use With Steam Or Other Vapor Generating Boilers

Parts And Accessories For Automatic Data Processing Machines

Structures And Parts Of Structures Nesoi, Of Iron Or Steel

Portable Digital Automatic Data Processing Machines

Millions of dollar

Others45%

Petroleum oils, not crude13%

Cyclic hydrocarbons

10%

Soya-bean oil9%

Television camera, transmissn app

8%

Cotton, not carded or combed

5%

Semi-finished products of iron

4%

Ground-nuts, not roasted

3%Trucks, motor

vehicles for the transport of goods

3%

Source: CBS

Top 10 Import of Indonesia from IndiaDominated by Manufactured Goods (2008)

China’s and India’s FDIInsignificant in Indonesia

Mauritius43.6%

Joint Countries21.8%

ASEAN12.5%

Japan9.2%

India0.1%

Europe7.3%

Australia0.3%

Other Asia Countries3.3%

USA1.0%

China0.9%

Source: Indonesia Investment Coordinating Board

China, India dan Indonesia: Trade and Investment

• Indonesian trade balance against China and India: surplus for oil and gas, but deficit for non-oil & gas

• Indonesian top 10 export to China and India are natural resources commodities. It is almost 80% for Indonesian export to India and 70% to China

• Import Indonesia from China and India: mostly manufactured products and final goods. Furthermore, on EHP implementation since 2004, Indonesia has imported a huge amount of agricultural products from China.

• Chinese and Indian FDI in Indonesia was relatively insignificant.

• Currently, there is a trend of acceleration of Chinese investment in Indonesia in infrastructure and oil & gas, while India in financial sector.

Contract Year Sector Amount 2004 Bridge US$ 150 million 2005 Oil (SOE) US$ 1.5 billion 2007 Railways (SOE) US$ 200 million

Other infrastructure US$ 600 million 2007 Dam US$ 239.7 million

Other infrastructure US$ 200 million 2008 Oil US$ 642 million

Power Plant (west Java) US$ 481.9 million Power Plant (east Java) US$ 293,2 million Power Plant (central Java) US$ 605,2 million Power Plant (south Sumatra) US$ 330 million Mining US$ 14.4 million Biodiesel US$ 255 million

2009 Emergency US$ 500.000 2009 Steel US$ 500 million 2009 Power Plant 60% of total 10000 megawatt

Power Plant (SOE) US$ 615 million

China Investment to IndonesiaIt Will Increase, Soon

• Indonesia government has received standby loan of USD 5.5 billion and Bilateral Currency Swap Agreement (BCSA) up to US$ 17.5 billion.

• The BCSA scheme will strengthen rupiah value and maintain financial stability, as well as encouraging trade and investment. China trade with Indonesia will be pushed on natural resources and raw materials. Indonesian trade will be continuously dominated by Chinese manufactured products. As China has agreed to provide Special Buyer Credit Facility (SBCF) for Indonesia.

China Loan to IndonesiaIncreased During 2008 Crisis

• China will focus their investment and trade on natural resources and raw materials, as well as infrastructure. On the other hand, Indonesian will be continuously importing Chinese manufactured products.

• This trend will make Indonesia become natural resources and raw materials exporter, as a consequence, employment opportunity growth will be stagnant, even slowing down.

China-Indonesia Trade and InvestmentNeed Improvement for Mutual Benefit

……Before ACFTALow Competitiveness of Indonesian Products

3.4% 3.2%

6.2%

4.1%

1.3% 1.2%

-3.7% -3.6%

-6%

-4%

-2%

0%

2%

4%

6%

8%

2001 2002 2003 2004 2005 2006 2007 2008

Source: CBSGrowth of Textile and Leather Product

Indonesia Exporting Raw Tin ........

China, 45%

Indonesia, 22%

Peru, 13%

Bolivia, 5%

Brazil, 4%Congo, 4%Vietnam, 2%

Others, 5%

Source: CBS

…..But, Increasing Importsof Tin Based Products

0.54

20.35

73.48

169.85

0.31

1.79

42.2

10.61

0 50 100 150 200

Flat-rolled iron or nonalloysteel products, <600 mm wide,

plated or coated with tin

Flat-rolled iron or nonalloysteel products, >600 mm ,

plated or coated with tin, > 0.5mm thick

Flat-rolled iron or nonalloysteel products, > 600 mm

wide, plated or coated with tin,< 0.5 mm thick

Radiotelephony,radiotelegraphy,

radiobroadcasting or television

2003

2007

Source: CBS

• Prior to FTA, China investment in Indonesia is only in natural resources sectors. Soft loans to Indonesia are mostly aimed at infrastructure development and natural resources. Considering the privatization trend in Indonesia, China will have bigger opportunity to own shares of strategic Indonesian SOE, like electricity, power plant, railway, steel, etc.

• Chinese investment pattern is most likely to be focused on natural resources exploitation and assembling plant for components/parts imported from China, so most of the value added goes to China. If this condition continues to occur, Indonesian and other ASEAN members’ natural resources will be drained. ASEAN members will fail to create competitive and productive industrial countries.

• Evaluating agreements related with FTA and postponement of FTA implementation.

• Immediately prepared industrial policy map road in order to increase national productivity and competitiveness

How to Increase Benefit from FTA