Written by Sutayasa. Edited by Putra Muskita. Published at http://heydiaspora.com/acfta-it-certainly-sounds-better-without-the-c-doesnt-it/

After a few days trying to find someone to accompany me to the economic seminar, I finally gave up and ended up going by myself on a fine Saturday morning to a seminar titled “ACFTA (ASEAN-China Free Trade Agreement) Indonesia’s Economic Challenges.” It was held in the Dhanapala Ballroom, the biggest room in the complex of Ministry of Finance, on 22^nd May 2010 and organized by Reformed Center for Religion and Society (RCRS). The speakers are prominent people in their area: Dr. Mari E. Pangestu, Indonesia’s Trade Minister; Prof. Dr. Ir. Alex S.W. Retraubun, M.Sc., Indonesia’s Vice Industrial Minister; and Sofjan Wanandi, Chairman of Indonesia Trader Association (APINDO).

Dr. Stephen Tong, the founder of RCRS, opened the seminar by mentioning that Indonesia’s most precious resource is the intelligence of its people, while its biggest challenge is actually the people’s stewardship skills. Not so much on how good they manage Indonesia’s natural resources, but more on how good they slip some government money into their own pockets. It is the moral issue that should be given extra focus in order to turn the country’s fate around.

1. Indonesia is the third largest democratic country in the world,
2. It is also the biggest economy in South East Asia
3. It has the highest economic growth (4.5%) in the world after China and India in 2009.

A less important fact that she mentioned, however, was that Indonesia is the second biggest Facebook user in the world after USA with a staggering 24 million people or 10% of Indonesia’s population. Not very relevant for her argument, but she managed to get some chuckles out of this one.

After setting the tone positively, she started organizing some arguments against ACFTA. Indonesia has a demographic advantage that it can enjoy over China for the next 15 years due to China’s one-child policy: 50% of Indonesia’s population are between 15 to 65 year old. Dr Pangestu displayed a chart showing Indonesia’s trade with China, positive on the overall until the 2008-2009 turning point. However, she did ay that the turning point was due to the steel imported from China for the Suramadu bridge project, the 10 megawatts project, and the cost of importing laptops and mobile phones produced in China.

Some other points that she brought up were that:

1. South of China’s regional minimum wage is about twice that of East Java
2. China is Indonesia’s second largest export destination after Japan and it’s higher than USA
3. More than 70% of goods that Indonesia imported from China are actually capital goods and the rest are dominated by foods, toys, and garment.

Those facts basically mean that China is getting more expensive for manufacturing, it is not Indonesia’s competitor, they are more of like Indonesia’s buyer and supplier.

She continued by arguing that ACFTA shall be the stimulus to increase our competitiveness, not to be a competitor that might negatively impact the local industry. However she reminded us that we can never compete head-on with China in goods that are being mass produced extremely cheaply. We should focus more on three key points: technology, quality, and productivity. “Target the mid-to-high market,” she said. And that marked the end of her 15 minutes.

Prof. Dr. Ir. Alex S.W. Retraubun, M.Sc., Indonesia’s Vice Industrial Minister, chose a different approach. Instead of sitting behind the table and reading the speech that was prepared for him by Ministry of Industrial staff, he walked to the podium and talked confidently without a script. He is surely one of the bluntest people I’ve ever seen working in a ministry – I’ve seen plenty of them before. He was a Professor at Pattimura University, Ambon and he was a scholar when he studied for his Graduate and Postgraduate degree in Newcastle University, UK.

Prof. Retraubun started his speech by saying that he was shocked when news about ACFTA started populating headlines of all newspapers in this country early this year: on average there were about 30 articles each day regarding ACFTA for the whole month of January. What was shocking for him, however, is not the frequency of ACFTA articles, but rather how the real sector and the government have done nothing but argue ever since the idea of this free trade agreement arose 14 years ago.

He continued with saying that he was not going to read anything from the speech prepared by his staff in Ministry of Industry. “Don’t worry, the concept in this speech is perfectly good. If you talk about concept, no one can beat Indonesia in this world, but yes, it’s only on concept,” he said. He also pitied his ministry albeit the fact that it’s one of the only five ministries that has Vice Minister because of its strategic nature, especially since the budget for Ministry of Industry is only 1.6 trillion Rupiah, lower as compared to, for example, Ministry of Ocean Affairs and Fisheries is 3 trillion Rupiah. Incidentally, he was the General Director of Ocean Affairs, Coasts, and Small Islands in Ministry of Ocean Affairs and Fisheries before he became the Vice Minister in Ministry of Industry.

Too bad I didn’t find a lot of relevant material in his speech outside of him saying that the sole purpose of having a Free Trade Agreement is to open the access to the market and by doing that we have to be fair, if we want them to allow us to sell our stuff we should let them sell their stuff too.

Not long after that is the time for Mr. Sofjan Wanandi, Chairman of Indonesia’s Trader Association (APINDO), to deliver his points. He preferred to say the other side of the coin that Indonesia is not ready and is not able to compete with China in a free trade market.

However he wasn’t fully pessimistic of Indonesia’s future; he laid out some problems with some possible solutions. He believed that economic growth based on consumerism culture is nothing that we should be proud of. It’s “not healthy,” he said. “Nothing better than increasing the gap between the rich and the poor that will come out of it. Nevertheless 4.5% (economic growth) is magnificent for a government that was practically sleeping,” he said.

He also mentioned that this country has taken its democracy out of control. “For the last 7 months there were no economic policy breakthrough because of people busy discussing cicak, buaya, and the Century Bank,” he added.

He believed the solutions are in:

1. Stop selling raw material abroad,
2. Process raw material locally like what Malaysia did,
3. Invest in labor-intensive industry, which started to leave China lately because of increasing cost there,
4. Invest in infrastructure,
5. Reform taxation,
6. Give tax amnesty like what South Africa and Italy did, stop looking back and try to find other people’s mistakes and start looking forward.

The seminars ended with questions and answers session, which seemed more like a moment for the traders to cry their heart out. All in all, I am glad that I finally came even though I was alone. Who knows all those insightful thoughts will affect my or your business decision in the future.

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