CAFTA -China-ASEAN Free Trade Area

A few days before we enter the year 2010. There is one thing that seems worth the attention of policy makers, including the banking business with the financial and transportation to support the physical facilities.

They need to evaluate in detail the implementation of the program's readiness for free trade area with China Association of Southeast Asian Nations (CAFTA).

2006 year-end meeting of the officials association of Southeast Asian nations (ASEAN) and China held in Nanning city, Guan Xi Province, China. One of the agenda is to establish a common vision within the framework of the Free Market in China-ASEAN Region (China-ASEAN Free Trade Area / CAFTA).

The Indonesian delegation in the meeting chaired by President Susilo Bambang Yudhoyono accompanied by Mari Elka Pangestu, Minister for Trade which was recognized during the business world are familiar with China and East Asia.

Then, the Indonesian businessman, elite observers Indonesia poliik and of course there is the question, namely what the rest of the meeting that CAFTA?

The idea of formation of CAFTA for the first time agreed in the Summit (Summit) ASEAN-7 in Bandar Sri Begawan, Brunei Darussalam, in November 2001. When it approved the establishment of the ASEAN CAFTA in 10 years, who formulated the ASEAN-China Framework Agreement on Economic Cooperation which was enacted in the next ASEAN Summit in Phnom Penh, Cambodia, in November 2002.

Since then many reviews appear. One was from Sheng Lijun, a researcher from the Institute of Southeast Asian Studies (ISEAS) in Singapore in 2003. Lijun write the study report "China-ASEAN Free Trade Area: Origins, Development and strategic Motivations". Sheng Lijun of China described the idea that CAFTA can be traced backward in 1995, when the very first time China proposed a special economic zone, in the form of a free trade zone (Free Trade Area / FTA) with the southern provinces of China.

As a follow since the early 1997 began the scientific discussions among academics who explore the various modes of special economic zones along the Yangtze River and Pearl River (Pearl River) which involves academics from Japan, South Korea, North Korea (Tumen River economic zone), Russia, ASEAN, Taiwan, and Hong Kong.

The concept of special economic zone that is different from the previous economic zone of China initiated the early 1980s, when China started its economic reform.

In 2000 the leaders of China supported a variety of scientists from various research centers of China initiated a more focused discussion, which proposed the formation of CAFTA (China-ASEAN Free Trade Area). Prime Minister of China, Zhu Rongji, who delivered the proposal on the ASEAN Plus Three Summit in Singapore in November 2000.

Although in a matter of time entering the sixth year at this time there seems to be a series of these forces can begin to create anxiety and fear witnessed when watching the movement of the balance of power (balance of power) toward the Middle Kingdom (Middle Kingdom).

Just imagine, when the idea emerged that CAFTA China agreed with ASEAN to begin implementation during the year 2010 will be the integration of the economy that includes 1.8 billion consumers (1.29 billion from China and 550 million from ASEAN) and not to mention that included Japan (population 127 million) and South Korea (population 48 million). This is recorded in the "2004 Economic Outlook for East Asia", Institute of Developing Economies / JETRO, Japan.

ASEAN and China approved the establishment of CAFTA in two stages of time, namely 1) the year 2010 with the founding of ASEAN, including Thailand, Malaysia, Singapore, Indonesia and the Philippines; 2) in 2012 there were five other countries in ASEAN include Brunei Darussalam, Vietnam, Cambodia, Laos and Myanmar.

Indonesia considered as part of CAFTA China regionalisme. Because of its territory and its ability, China is also intended to establish a free trade zone with Japan and Korea.

Since the beginning of 2004 Indonesia handed over a list of 400 categories of products containing comparatively higher sensitivity and berkepekaan (sensitive and highly sensitive goods) to be excluded from CAFTA liberalization scheme. In the sensitivity list includes 348 tariff categories of the field of automotive and electronic industries, including components industry, some sectors of the textile and chemical industries.

Meanwhile, high berkepekaan list includes 50 categories of tariffs, including rice, sugar, soybeans, and corn. In addition there are several other food groups.

At trial AEM (ASEAN Economic Ministers Meeting) to 36 in Jakarta in September 2004 occurred negotiations with China that produces trade agreement in goods and services and the main points of solving some problems later formalized into the meeting in Laos.

In the framework of CAFTA most goods traded between Indonesia and China implementations reduction / elimination of tariff of 5250 made the product categories and time to follow the scheme as follows:
1. Early Harvest Program (EHP) which came into effect as of January 1, 2004 in stages over a period of 3 (three) years, tariff duties include product introduction EHP some 449 products to zero percent (0%).

2. Normal Track I, a number of product categories to 3913 reduction in tariffs to zero percent (0%) starting in 2005.

3. Normal Track II, some 490 categories of products with a reduction in import duties beginning in 2012.

4. Sensitive / Higly many as 398 categories of sensitive products that the number of concessions were negotiated in more detail.

Ministry of Trade Republic of Indonesia in 2004 noted that the tariff classification is based on a six-digit category of the ASEAN Harmonized Tariff Nomenclature (AHTN).

In this case the Indonesian business people should understand and observe that the imposition of CAFTA, the country will enjoy a reduction in non-tariff barriers (non-tariff barrier / NTB) for various export products to China.

Today there are as many as 13 (thirteen) of NTB-affected commodities, including refined oil, wood, polyester, acrylic fibers, natural rubber, tires (rubber), sodium cyanide, refined sugar, chemical fertilizer, tobacco and cigarettes, and quotas and tariffs on cocoa beans to China valued at 10%, while zero percent of Malaysia. For oil palm is not clear imposition and cause competition from coming from other countries.

Of the ten products, Indonesia still has a market share large enough in China. Unfortunately due to weakness in competitive with fellow ASEAN, many of these commodities began to lose market share. Indonesian products are weakening its competitiveness because most business people in this country still focused on that market is not experiencing growth or are not aware that China began to squirm businesses to empower the internal potential that had not worked.

In relation to Indonesia, the China is very aware of and understand the availability of natural resources as raw materials for industry in China.

Data non-oil exports to China in Indonesia in 2005 showed that the more significant exports are coconut oil, pulp, natural rubber, balata, copra, copper, and raw materials other natural resources.

Indonesian businesspeople seem to realize and understand that Malaysia, Singapore and the Philippines as a fellow member of ASEAN commodity exports accounted competitor to China. In addition, Indonesian businessmen should not close their eyes that there still exists a number of barriers to enter China's market, like NTB constraints that each time change. Today NTB was a quota, the system permits the entry of refined oil products, timber, natural rubber and some other commodities.

Lots of business elites with the national in this country have not quite reliable use of regional negotiations to acquire or deepen their market share over a number of products that become the seed into China.

One thing that should be observed among the Indonesian elite and businessmen is that during the 1997-1998 Asian financial crisis, China's foreign exchange reserves it has since increased further. In fact, Bamboo Curtain country, according to various studies have recorded reserves at the end of 2009 reached approximately 2.2 trillion United States (U.S.). Increasing foreign exchange reserves showed competence and capacity of China, especially in terms of exports.

Service Indonesian bureaucracy that "better quality, faster, and cheaper" (better, faster and cheaper) should be no political slogans. For the sake of business efficiency from the center to areas of potential need to fill in CAFTA. On the business side must continue to be managed with productivity, including the empowerment of middle management and increasing not boring.

Indonesia ready to face the CAFTA? Or do they need to re-negotiate to delay the measures more detailed and substantial, such as CAFTA began in 2012? This is a series of challenges for us all, especially among business and political elite and government observers. (Bob Widyahartono)