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FTA drives Indonesian clothing firms to the edge
May '10
A garment manufacturer blames cheap Chinese textile products, which are flooding his market under a free trade pact between China and its Southeast Asian neighbours, for ruining his fifteen-year long business leading him to bankruptcy.

The Indonesian government and other business experts consider the free trade pact as an economic boon, as it allows free flow of goods between countries comprising 1.7 billion people by reducing prices for buyers and offering new avenues for manufacturers.

While the Trade Ministry hopes that the two-way trade between Indonesia and China will double to $50 billion within five years, a couple of Indonesian firms have said that their small operations are unable to match the prowess of the strong Chinese textile firms.

They are therefore now knocking at the government's doors so that it can act fast and save the businesses from collapsing. The small time garment and textile manufacturers are slowly feeling the brunt of this trade pact as their businesses are slowly declining.

China and six founding members of the Association of South East Asian Nations (ASEAN) i.e. Indonesia, Brunei, Philippines, Singapore, Malaysia and Thailand signed the free trade pact and the same came into effect from January 1.

Under this pact, barriers hindering inter-country trade of nearly 90 percent products were removed and made duty-free. By 2015, four more ASEAN countries, Laos, Myanmar, Vietnam and Cambodia will be added to this list.

As per the deal, exports of raw materials and commodities to China from Indonesia will benefit as China is a big importer of raw materials, which are needed to feed its industries. However, the textile and clothing firms have not been able to compete against China's competitive goods manufacturers and have urged the government to reverse the decision of FTA on 228 goods lines.

However, the government is not in favour of delaying the implementation of protective tariffs as it said that it would then have to re-negotiate with China and all other ASEAN countries, which was not feasible. But, according to a source from the worker's union, the pact will adversely affect country's job sectors, with several thousands of people likely to lose their jobs.

As per a senior official from the Manpower Ministry, currently, the country was not in a position to compete in the international markets with a hundred percent commitment to the free trade pact. But yet, he said, Indonesia should not be considered incompetent when compared to other ASEAN countries, in international trade.

According to an industrial analyst, the controversial tariff lines target only a fraction of the products that fall under the free trade pact. But yet, early market trends have already shown that the key losers will be the unskilled workforce and sectors that manufacture cheap-quality goods, mainly the textile sector.

Small clothing producers in Jakarta are already facing the adverse effects of the free trade pact. And once fully implemented, the trade is most likely to destroy approximately 3,000 small clothing businesses that line the lanes of Jakarta, avers a small-time garment producer.

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