RI’s products losing ground to Chinese imports

Rangga D. Fadillah, The Jakarta Post, Jakarta | Thu, 03/24/2011

Indonesian products are losing ground in the domestic market to Chinese products, following the implementation of the ASEAN-China Free Trade Agreement (ACFTA), government research shows.
Agus Tjahayana, director general for international industrial cooperation at the Industry Ministry, said the results of the recent ministry survey, canvassing 4,236 traders and 12,151 buyers of both Indonesian and Chinese products, confirmed the troublesome trend.
“From the survey, we see a trend of declining market share for our products, as more consumers prefer buying products imported from China,” he told reporters at a press briefing in Jakarta on Wednesday.
The survey revealed most traders preferred selling Chinese products instead of domestically-made ones because their profits rose by around 20 percent, he added.
“This negative trend caused several sensitive industries to experience production declines last year,” Agus said.
Most consumers bought Chinese products for their cheap prices, unique and creative designs and functionality, although they admitted that the products were not very durable, according to the survey.
Conducted in 11 major Indonesian cities, Medan in North Sumatra, Padang in West Sumatra, Jakarta, Bandung in West Java, Semarang in Central Java, Surabaya in East Java and Makassar in South Sulawesi, the survey focused on the five most-affected industrial sectors: textiles, furniture, metals, machinery and electronics.
From the data, the ministry concluded that implementing the ACFTA caused an increase in raw material imports, decrease in domestic product sales, decline in producers’ profits and declining employment.
Agus said the main reasons why Indonesian products were less competitive than Chinese products were expensive raw materials, unstable and high energy prices and limited access to capital.
According to the Trade Ministry, in 2010, Indonesia and China’s non-oil and gas trade balance posted a US$5.6 billion (Rp 48.85 trillion) deficit in favor of China, increasing $1 billion from 2009. However, the deficit last year was still far below that of 2008, which reached $7.2 billion.
The ministry claimed that ACFTA’s implementation was “useful” for Indonesia, since the country’s non-oil and gas exports to China in 2010 reached $14.1 billion, jumping 57.8 percent from 2009.
The data revealed that industrial products still dominated Indonesia’s exports to China.
From January to November last year, exports topped $7 billion, up 31.9 percent from the same period in 2009.
In 2010, Indonesia’s total export touched an all-time record of $157.73 billion, up 35.4 percent from 2009, mainly driven by rising prices of natural resource-based commodities such as crude palm oil, coal, rubber and copper.