ASEAN-6 zero tariffs take effect immediately

The Jakarta Post, Jakarta | Sat, 01/02/2010 12:58 PM

Tariffs on 7,881 goods traded between six ASEAN founding nations were lifted Friday, signaling better economic prospects for producers and consumers alike.

The elimination of tariffs by Indonesia, Brunei, Malaysia, the Philippines, Singapore and Thailand is a step toward an integrated ASEAN economy, with the remaining countries - Cambodia, Laos, Myanmar and Vietnam - set to join in 2015.

The six countries can now import and export 54,457 types of products, or 99.11 percent of all traded goods, across their borders at no cost, under the Common Effective Preferential Tariffs for ASEAN Free Trade Area, in place since 1992.

For Indonesia's more than 200 million consumers, increased competition in the market will mean lower prices and better services.

The business sector is just as excited about the new opportunities.

Indonesian Food and Beverage Industry Association chairman Thomas Dharmawan told The Jakarta Post that FTAs were "important for *the domestic food and beverage* industry".

"It's high time that the players in this industry start competing with those from other countries and seek out bigger potential target markets," he said.

Goods for which there will no longer be a tariff include final consumer products as well as intermediate products, such as car and motorcycle components.

Thomas said he was not concerned about the Indonesian food and beverage industry having to compete with an influx of products from the five other countries, or even China.

An FTA between China and ASEAN also took effect as the clock struck midnight on Jan. 1, ending tariffs on 90 percent of goods.

Local textile and furniture players are among those who have objected to the competition from lower-priced Chinese products.

Thomas, however, said prospects for the country's food and beverage industry were good.

"Indonesia has very effective non-tariff barriers for food and beverage products," he said.

"They must, for instance, be registered with the BPOM *Food and Drug Monitoring Agency* or have halal certification."

The export prospects for Indonesia's car industry are also looking up, says Gunadi Sindhuwinata, president director of car and motorcycle assembler PT Indomobil Sukses International.

"With the removal of these tariffs, the ASEAN markets are now wide open for us," he told the Post, adding exports may rise in following years.

"But it depends a lot on the target countries' economic performance."

Thirty percent of the 603,700 cars sold here in 2008 were exported.

Gunadi, however, was more pragmatic about the export prospects for motorcycles.

"Our motorcycle exports have always been very low, just 1 percent of total sales, or around 60,000 units in 2008," he said.

"We export to other developing countries, which have their own motorcycle industries, but of a smaller capacity."

He added the motorcycle industry in Indonesia was likely to survive the competition.

However, both Gunadi and Thomas also pointed out the challenges facing Indonesia.

"We have higher interest rates and transportation costs, with limited infrastructure in place, not to mention illegal levies," Thomas said.

"The government must end to this high-cost economy." (adh)