Economy

Indonesia needs China more in ACFTA: economist

(Xinhua)
Updated: 2010-04-19 14:59

JAKARTA - Indonesia needs China more than the country does in the ASEAN-China Free Trade Agreement (ACFTA) as China absorbs more of Indonesia's export, the Jakarta Post quoted an analyst as saying on Monday.

Economist Riyadi Suparmo said that the size of the Chinese economy is now the second only to the United States, and still growing rapidly.

He said that for the longer-term, the free trade will benefit all parties, with more trade and better welfare for Indonesians.

"China absorbed 9.2 percent of our total non-oil exports last year but China's imports from Indonesia accounted for only 1.3 percent of their total imports. China absorbs more and more of our exports while our traditional markets are shrinking," he said.

Riyadi said that the shares of Indonesian exports to the US, Japan and European Union countries have respectively gone down from 14.4 percent, 15 percent and 16 percent in 2004 to 10.7 percent, 12.3 percent and 14 percent last year.

He said that China become the third biggest export market for Indonesia last year, with non-oil exports to China reaching $8.9 billion after Japan ($11.98 billion) and the US ($10.5 billion).

Riyadi said that Indonesia may soon regain a trade surplus position following the full implementation of ACFTA this year after suffering trade deficit in 2008.

"We had enjoyed trade surpluses in the period of 1999 to 2007, suffering deficit in 2008. But in 2009 and the first two months of this year the gap narrowed," he said.

Indonesia also enjoy big market share for some of its commodities in China.

"Our palm oil dominates the Chinese market, with our market share up to 22 percent last year from 17.4 percent in 2004," he said.

Indonesia, he said, also has other products that currently dominate Chinese market like tin, cocoa, rubber, shoes, pulp and musical instruments.

He also said that Indonesia's handicraft products from rattan and bamboo are gaining popularity in China, controlling almost 30 percent of Chinese market, but their market value is still small at 23 million dollars.

According to Riyadi, when Indonesia is ready to export more products to China, it means that the country is becoming more competitive.

"If we can compete with China, we can compete with the rest of the world," he said.

He said that free trade with China is the best available motivation to push Indonesia to compete globally.