Some RI businesses unsure of benefits of liberalization

Andi Haswidi, The Jakarta Post, Jakarta

While national leaders at the World Trade Organization (WTO) are haggling over a trade liberalization scheme under the Doha Development Agenda (DDA) framework, some businesses in Indonesia are still unaware of the benefits of liberalization, a forum has been told.

"Trade liberalization issues are not an easy sell in Indonesia. I think, this is largely to do with an inaccurate assessment of the overall benefits of liberalization," Indonesian Chamber of Commerce and Industry permanent committee head on the WTO, Oloan Siahaan, told a discussion organized by the Center for Strategic and International Studies (CSIS) in Jakarta on Monday.

For businesses that are not directly affected by the lowering of tariff barriers, Oloan said, it is harder for them to calculate the benefits compared to those directly affected, such as export and import companies.

"Most of us will probably gain from the dynamic effects of liberalization as they flow through the economy over time, pushing us to be more competitive. But for most businesses, this is an intangible benefit that they are unable to link directly to trade liberalization," he said.

Oloan said there was also a question of "liberalization fatigue", as well as nationalist sentiment questioning why Indonesia should open up its large market to others while it was still incapable of competing in many fields.

"The argument is, why we should unleash even more competitive forces when the economy is not yet competitive? In other words, business is not convinced that the benefits of liberalization can filter through the economy as we still have structural barriers to address," he said, referring to constraints such as inflexible labor law, inadequate infrastructure, poor labor skills and other issues that directly affect the cost of doing business.

In his conclusion, Oloan said that many businesses expressed the view that things were going fairly well in trade and investment at the moment, so that they did not see the urgency of the DDA.

The negotiations under the DDA are likely to be postponed as one of the main players, the United States, is soon to enter into an election cycle, not to mention the fact that the special negotiating rights of its president expired in June.

In previous negotiations, the U.S. refused to lower its agricultural subsidies as demanded by other WTO members, including the European Union and the group of 46 developing countries, while, for its part, the EU refused to further lower its export subsidies.

Also speaking during the forum, Trade Minister Mari Elka Pangestu said that despite the possible postponement, the DDA negotiations would ultimately be successful.

"So far, none of the WTO negotiations have failed. The Uruguay Round took eight years. Doha so far has been going for six years. Maybe it too will get to eight. We don't know, but it will not fail," she stressed.

CSIS chairman and executive director of the Prasetya Mulya Business School, Djisman Simandjuntak, said that the world economy would continue to open up in line with the expansion of science and knowledge.

Therefore, he said, business leaders had to engage in the efforts to keep trade liberalization alive at all levels of the business community, and keep disseminating knowledge on trade liberalization.

"Nevertheless, the key is the way in which we finish our own homework," he said, referring to efforts to overhaul Indonesia's high-cost economy.