Business, Finance & Economics

Economic worries in Indonesia? Blame the Chinese.


CIPULIR, Indonesia — They say it’s all about location, location, location.

But here, sitting outside her store in the corner of the fourth floor of a crowded indoor garments market, Ibu Nasution says the only threat to her business is the Chinese.

“When they get here, nobody will buy these clothes anymore. We won’t be able to pay our debts. We won’t be able to eat. Things are going to get bad,” she said, sitting on a dusty stack of tightly wrapped T-shirts.

Her stall is just one of hundreds packed into the busy Cipulir Market, a crumbling five-story building that is known throughout Jakarta as the place to find original Indonesian textiles. The sellers here once reveled in that reputation. But now a cloud of apprehension has muted their spirits.

The garment traders are concerned about the Jan. 1 implementation of a China-ASEAN free trade agreement that requires a reduction or elimination of import tariffs across 7,000 product lines, including most garments and textiles.

“The Chinese have their big machines and they sell their clothes for a third of the price we sell ours,” Nasution lamented. “I can’t compete with that.”

Proponents of the deal say it will allow the rest of Asia to benefit from China’s growth by opening up large markets for ASEAN exports, while giving China greater access to Southeast Asia’s raw materials. Worth $200 billion, the pact is the third largest by trade volume after the European Economic Area and the North American Free Trade Zone. Serving about 2 billion people, it’s the world’s largest trade deal by population size.

Originally signed in 2002, the pact was highly anticipated during its eight years of negotiations. And some say it could be the precursor to a larger deal involving China, ASEAN, Japan, South Korea and the United States.

But Indonesia, responding to a domestic popular backlash, has now begun leading opposition to it all.

Though customs officials here said there was no change in the amount of Chinese imports over the last week since the deal’s implementation, leaders from a number of Indonesian industries — already suffering from the global economic crisis — said they are bracing themselves for a bad year ahead.

Thousands of workers, worried that an influx of cheap Chinese-made goods would drive them out of their jobs, gathered this week in West Java to protest the reduction in tariffs and demanded the deal be delayed, while several union leaders predicted layoffs in the tens of thousands should the agreement remain as is.

Trade officials announced on Jan. 4 that they would request a formal review of the agreement in the hopes of delaying the reductions of tariffs among sectors like steel, textiles, cosmetics, petrochemicals and others that could face overwhelming competition from cheaper Chinese imports.

“The notification we sent to the ASEAN Council last week stipulates we want a renegotiation,” Indonesia’s Minister for Industry Mohammad Suleman Hidayat, told The Jakarta Post.

The Chinese, for their part, said they would adhere to the already signed agreement and tried to assuage fears among Indonesian industries.

“Such worries are understandable,” said Yi Ziaozhun, China’s deputy minister for commerce at the deal’s opening ceremony. “But the free trade agreement is mutually beneficial. Policymakers from both regions have reached a consensus that trade pressures would ultimately be transformed into an impetus that drives the economic development of the whole region.”

Concerns here over an influx of Chinese goods are nothing new. Tariffs have been gradually reduced since 2005 and black market Chinese goods have long plagued traders of all kinds.

Indonesian producers of batik, the country’s proud tradition of creating intricate patterns on textiles with wax-resistant dyes, for instance, were outraged earlier last year when cheap batik knockoffs from China began muscling in on their market share.

At the famous Tanah Abang Market in central Jakarta, sellers there have already long begun offering their customers Chinese-made alternatives at much cheaper prices — a decision they said wasn’t by choice.

“We sell Chinese-made products here because the customers prefer them,” said Ferry, 26, who sells garments from the basement of Tanah Abang. “They like China’s clothes because they come in more diverse styles, materials and colors and are always either the same price or cheaper.”