Transcript Slide 1

Recent Development of ASEAN's
Economic Relationship with
China and India
By: Hendri Saparini, Ph.D
Managing Director
ECONIT Advisory Group
[email protected]
IDEAs Workshop
New 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
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.
Preparations are currently being undertaken for the ratification and the
subsequent implementation of the Agreement by the parties
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
20
15
China
India
Indonesia
ASEAN-5
5
0
19
90
19
91
19
92
19
93
19
94
19
95
19
96
19
97
19
98
19
99
20
00
20
01
20
02
20
03
20
04
20
05
20
06
20
07
20
08
Percent
10
-5
-10
-15
Source: IMF
GDP Comparison:
ASEAN’s GDP only 34% of the Chinese (2008)
China
4,401.6
India
1,209.7
Indonesia
511.8
Thailand
273.2
Malaysia
222.2
Singapore
181.9
Philippines
168.6
Viet Nam
89.8
Myanmar
27.2
Brunei Darussalam
14.6
Cambodia
11.2
Lao PDR
5.3
0
500
1000
1500
2000
2500
3000
3500
4000
4500
Billions of USD
Source: 2008 figure, IMF
GDP Structure:
ASEAN members, China and India
120
100
8.0
19.1
23.1
Percent
15.2
9.7
30.9
6.2
19.1
8.4
11.6
11.9
12.5
12.9
13.5
10.7
20.8
20
28.8
27.8
41.1
44.4
60
40
1.1
39.7
80
39.8
2.8
54.7
36.1
41.0
54.8
71.1
67.3
60.9
45.2
20.1
0
-1.8
-5.3
-16.5
-20
Brunai
China
Singapore
Private consumption
Malaysia
India
Government consumption
Thailand
Indonesia
Vietnam
Gross domestic capital formation
Philipina
Net Export
Source: ADB
High Growth of FDI in China:
Impact of Economic Reform
120
China
100
ASEAN
60
40
20
Indonesia
-
India
19
80
19
82
19
84
19
86
19
88
19
90
19
92
19
94
19
96
19
98
20
00
20
02
20
04
20
06
20
08
Billion USD
80
(20)
Source: UNCTAD
FDI Inflow (1998-2008):
China is far Above ASEAN
China
677.2
ASEAN
396.4
Singapore
190.0
Thailand
75.3
Malaysia
47.8
India
33.5
Vietnam
29.2
Indonesia
20.3
Philippines
17.4
Brunei Darussalam
8.4
Cambodia
3.7
Myanmar
3.3
Lao People's Dem. Rep.
1.0
0
100
200
300
400
Billion USD
500
600
700
Source: UNCTAD
Exports and Import:
Huge Surplus of China’s International Trade
1428.5
China
879.3
ASEAN
187.4
India
241.4
Singapore
194.5
Malaysia
Exports
Imports
175.0
Thailand
137.0
Indonesia
Viet Nam
61.8
Philippines
49.0
Brunei Darussalam
8.8
Myanmar
6.6
Cambodia
4.4
Lao PDR
0.8
0
200
400
600
800
1000
1200
1400
1600
Billions of USD
Source: Asean Economic Community Chartbook, 2008
Top 5 ASEAN Exports to China:
Dominated by Electonics Parts and Primary Commodities
Others, 58%
Electronic integrated
circuits and
microassemblies, 18%
Palm oil & its
fractions, not
chemically modified,
5%
Automatic data
processing machines;
optical reader, etc, 7%
Natural rubber,
balata, gutta-percha
etc, 6%
Petrolium oils, not
crude, 6%
Source: Asean Economic Community Chartbook, 2008
ASEAN Commodities Export to China:
Main Source for China’s Demand , 2008
Marble,travertine, ecaussines etc
76.6
Niobium, tantalum, vanadium ores & concentrates
76.7
Zinc ores & concentrates
76.9
Ores & concentrates, nes
77.3
compounded rubber, unvulcanised, in primary forms
82.9
84.1
Iron oxides & hydroxides
Zirconium & articles thereof, including waste & scrap
86
Chromium ores & concentrates
89.9
Alumunium ores & concentrates
91.8
94.8
Iron ores & concentrates; including roasted iron pyrites
Slag. Dross other than granulated slag
97
Uranium or thorium ores & concentrates
99.9
75
80
85
90
95
100
Percent
Source: ASEAN Economic Commonity Chartbook 2009
5 Top ASEAN’s Import
ASEAN from China, 2008
Others, 76%
Hot rolled, flatrolled products of
iron or nonalloy
steel, 2%
Electronic
integrated circuits
and
microassamblies,
5%
Automatic data
processing
machines; optical
reader, etc, 5%
Electric app for line
telephony,
including current
line system, 6%
Parts & acces od
computers & office
machines, 6%
Source: ASEAN Economic Commodity Chartbook, 2009
Main ASEAN Countries’ Exports to India:
India Dependent for Raw Materials (2008)
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
ASEAN Imports from India (2008)
Why being dominated by Petroleum Oils?
Refined copper
and copper alloys,
Soybean oilcake & unwrought, 3%
other solid
residue, 4%
Diamonds, not
mounted or set,
5%
Petrolium oils, not
crude , 31%
Electric app for
line telephony,
including current
line system , 3%
Others, 54%
Source: ASEAN Economic Community Chartbook 2009
ASEAN trade with China:
Continuous increase of deficit
120
100
Import
Billion USD
80
60
Export
40
20
0
-20
-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
Balance of trade
-21.4
-40
1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008
Source: ASEAN Statistical Yearbook, 2008
ASEAN - India Trade:
Surplus with Value Added?
35
30
Export
20
Import
15
10
Balance of trade
5
0
19
95
19
96
19
97
19
98
19
99
20
00
20
01
20
02
20
03
20
04
20
05
20
06
20
07
20
08
Billion USD
25
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
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
Source: ASEANSEC
Tariff reduction on ACFTA
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
0
0
X < 5%
Standstill
Agreement on Trade in Goods of the Framework Agreement on Comprehensive
Economic Co-operation ACFTA starting on January 1, 2005
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%
*Simple average across all partners countries
Source: ITC
Average Tariff Applied (2007) * #2
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%
*Simple average across all partners countries
Source: ITC
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.
Relationship of ASEAN-China and ASEAN-India
•
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.
Indonesian Economic Relationship
with 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
120
100
Percent
80
Statistical discrepancy
Net Export
Gross domestic capital
formation
Government consumption
Private consumption
60
40
20
0
-20
China
India
Indonesia
Source: ADB
Manufacture Productivity and Competitiveness
Increasing Foreign Reserve of China
2,500
2,000
1,000
500
08
20
06
20
04
20
02
20
00
20
98
19
96
19
94
19
92
19
90
19
88
19
86
19
84
19
82
19
80
-
19
Billion USD
1,500
500-
Source: State Administration of Foreign Exchange Bureau of PRC
Economic Reform:
Increasing India Foreign Reserve
300
250
150
100
50
Jul-09
2008
2007
2006
2005
2004
2003
2002
2001
2000
1999
1998
1997
1996
1995
1994
1993
1992
1991
0
1990
Billion USD
200
Source: Reserve Bank of India
Indonesia Foreign Reserved:
Unstable, Not a Result of Productivity and Competitiveness
60
50
Billion USD
40
30
20
10
0
2000
2001
2002
2003
2004
2005
2006
2007
2008
Source: Bank of Indonesia
China’s Export:
Focusing on Manufacturing Goods
100%
90%
80%
70%
60%
50%
Manufactured Goods
40%
30%
20%
10%
Primary Goods
20
07
20
05
20
03
20
01
19
99
19
97
19
95
19
93
19
91
19
89
19
80
0%
Source: Ministry of Commerce PRC
India Exports
Dominated by Manufactured Goods
100%
90%
80%
70%
60%
50%
40%
Manufactured goods
30%
20%
10%
Primary products
Primary Product
19
88
19
89
19
90
19
91
19
92
19
93
19
94
19
95
19
96
19
97
19
98
19
99
20
00
20
01
20
02
20
03
20
04
20
05
20
06
20
07
20
08
0%
Source: Reserve Bank of India
Indonesian Export:
Increasing Shares of Primary Commodity
100%
90%
80%
70%
Non Primary Commodity
60%
50%
40%
Primary Commodity
30%
20%
10%
0%
2002
2003
2004
2005
2006
2007
Source: CBS
2008
Trade Balance Indonesia-China
Surplus for Oil & Gas, Deficit for Non Oil & gas
6
4
Billion USD
2
0.50
0.82
1.71
1.12
0
-2
-4
(3.61)
-6
-8
2004
2005
Balance of trade
2006
Oil and gas
2007
2008
Non-oil and gas
Source: Ministry of Trade
Indonesia-India Trade Balance
Surplus for Non-Oil & Gas, Mainly Raw Materials
5
4
Billion USD
3
4.26
2
3.33
1
1.83
1.98
2005
2006
1.07
0
2004
2007
2008
-1
Balance of trade
Oil and gas
Non-oil and gas
Source: Ministry of Trade
Top 10 Exports Indonesia to China
Dominated by Natural Resources (2008)
2,469.0
Petroleum gases
1,519.3
Palm oil & its fraction
Crude petroleum oils
1,188.8
Natural rubber,balata,gutta-percha etc
859.1
Chemical wood pulp,
742.3
Coal
716.4
337.0
Coconut (copra)
Nickel ores and concentrates
230.9
Copper wire
210.2
Aluminum ores and concentrates
203.6
-
500.0
1,000.0
1,500.0
2,000.0 2,500.0
Million USD
Source: CBS
3,000.0
Top 10 Exports Indonesia to India
Dominated by Natural Resources, too (2008)
Coconut (copra),
2%
Binders for foundry
molds or cores, 2%
Copper ores and
concentrates, 4%
Petroleum coke,
1%
Chemical wood
pulp, 1%
Natural rubber, 1%
Others, 14%
Coal, 17%
Palm oil & its
fraction, 58%
Source: CBS
Top Imports Indonesia from China (2008)
Mostly Manufactured Products, but Agricultural, too
Portable Digital Automatic Data Processing Machines
306
Structures And Parts Of Structures Nesoi, Of Iron Or Steel
194
Parts And Accessories For Automatic Data Processing Machines
181
Auxiliary Plant For Use With Steam Or Other Vapor Generating Boilers
155
Garlic, Fresh Or Chilled
151
Aluminum Nonalloyed Rectangular
147
Superphosphates Fertilizers
145
Disodium Carbonate
138
Parts And Accessories Of Motorcycles
125
Petroleum Oils And Oils From Bituminous Minerals, Crude
121
Parts For Auxiliary Plant For Use With Steam
99
Steam And Other Vapour Turbines
93
Flat-Rolled Products Of Iron Or Non-Alloy Steel
92
Parts For Machinery Making Or Finishing Paper Or Paperboard
90
Antennas And Antenna Reflectors
87
Mandarins (Including Tangerines And Satsumas), Fresh Or Dried
85
Apples, Fresh
83
Tobacco
81
-
50.00
100.00
150.00
200.00
250.00
300.00
350.00
Millions of dollar
Source: CBS
Top 10 Import of Indonesia from India
Dominated by Manufactured Goods (2008)
Semi-finished
products of iron
4%
Cotton, not carded
or combed
5%
Television camera,
transmissn app
8%
Ground-nuts, not
roasted
3%
Trucks, motor
vehicles for the
transport of goods
3%
Others
45%
Soya-bean oil
9%
Cyclic
hydrocarbons
10%
Petroleum oils, not
crude
13%
Source: CBS
China’s and India’s FDI
Insignificant in Indonesia
China
0.9%
USA
1.0%
Australia
0.3%
India
0.1%
Other Asia Countries
3.3%
Europe
7.3%
Japan
9.2%
Mauritius
43.6%
ASEAN
12.5%
Joint Countries
21.8%
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.
China Investment to Indonesia
It Will Increase, Soon
Contract Year
2004
2005
2007
2007
2008
2009
2009
2009
Sector
Bridge
Oil (SOE)
Railways (SOE)
Other infrastructure
Dam
Other infrastructure
Oil
Power Plant (west Java)
Power Plant (east Java)
Power Plant (central Java)
Power Plant (south Sumatra)
Mining
Biodiesel
Emergency
Steel
Power Plant
Power Plant (SOE)
Amount
US$ 150 million
US$ 1.5 billion
US$ 200 million
US$ 600 million
US$ 239.7 million
US$ 200 million
US$ 642 million
US$ 481.9 million
US$ 293,2 million
US$ 605,2 million
US$ 330 million
US$ 14.4 million
US$ 255 million
US$ 500.000
US$ 500 million
60% of total 10000 megawatt
US$ 615 million
China Loan to Indonesia
Increased During 2008 Crisis
•
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-Indonesia Trade and Investment
Need Improvement for Mutual Benefit
•
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.
……Before ACFTA
Low Competitiveness of Indonesian Products
8%
6.2%
6%
4.1%
4%
3.4%
3.2%
2%
1.3%
1.2%
0%
-2%
-3.7%
-3.6%
2007
2008
-4%
-6%
2001
2002
2003
Growth of Textile and Leather Product
2004
2005
2006
Source: CBS
Indonesia Exporting Raw Tin ........
Others, 5%
Vietnam, 2%
Congo, 4%
Brazil, 4%
Bolivia, 5%
China, 45%
Peru, 13%
Indonesia, 22%
Source: CBS
…..But, Increasing Imports
of Tin Based Products
Radiotelephony,
radiotelegraphy,
radiobroadcasting or television
10.61
169.85
Flat-rolled iron or nonalloy
steel products, > 600 mm
wide, plated or coated with tin,
< 0.5 mm thick
42.2
73.48
2003
2007
Flat-rolled iron or nonalloy
steel products, >600 mm ,
plated or coated with tin, > 0.5
mm thick
1.79
20.35
Flat-rolled iron or nonalloy
steel products, <600 mm wide,
plated or coated with tin
0.31
0.54
0
50
100
150
200
Source: CBS
How to Increase Benefit from FTA
• 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