Indonesia is slated to ratify the eighth package of the Asean
(Association of Southeast Asian Nations) Framework Agreement on Services (AFAS)
next year, which will further open the country's service sector to regional
players.
The deal is a prelude to the
establishment of the Asean single market in 2015 that will see free flows of
labour, trade and services among the association's member nations.
AFAS ratification will affect
sectors related to telecommunications, business services, education, tourism,
health, recreation and logistics, covering around 22 subsectors, according to
the Trade Ministry.
The agreement is expected to
strengthen Indonesia's commitment to the liberalisation of the sectors by 2015.
"In 2015, companies [from
other Asean nations] will be able to have as much as 70 per cent of foreign
equity participation in Indonesia," said the ministry's director for trade
and service negotiations, Sondang Anggraini, yesterday during a workshop hosted
by the ministry.
The government is preparing
several legal frameworks to further regulate the service trade that will help
local firms to achieve greater gains from liberalisation, such as by selling
services to other countries, according to Anggraini.
"The policy will help shift
the country's source of foreign currency from the export of goods to the export
of services," Anggraini said.
In recent years, Indonesia has
seen a rise in the contributions made by the service sector to its economy.
Service-related sectors accounted
for 53.13 per cent of gross domestic product (GDP) in 2011, up from 48.20 per
cent in 2006.
Indonesia Logistics and
Forwarders Association executive director Theo Kumaat was cautious about
liberalisation in the logistics sector, as it would severely impact local
logistics players still struggling with output inefficiency.
According to Kumaat, Indonesia's
high costs of doing business had undermined its performance relative to its
regional peers.
Indonesia ranks 59th on the World
Bank's 2012 logistics performance index, lower than fellow ASEAN members
Vietnam and the Philippines.
Despite the low ranking,
Indonesia has seen a significant improvement in logistical handling competency
and tracking systems, according to the World Bank.
"Most of our local companies
are not yet ready to compete with regional players. If the government insists
on liberalisation, I am afraid that local players will only deal with
subcontracting work to serve foreign companies," Kumaat said.
The logistics sector, according
to Kumaat, was still grappling with a shortage of skilled local workers.
Opening more doors for more skilled foreign workers could result in jobs
filling up once liberalisation takes place.
In anticipation of changes in labour
regulations, local stakeholders are planning to set up an institution that will
establish standards and certifications for both local and foreign workers.
Liberalisation of logistics
services under the eighth AFAS comprises two major sectors: packaging and
freight transportation, including maritime, freight, rail and road
transportation; cargo handling services; storage and warehousing; freight
transportation agency services; and courier services.
Indonesian Logistics Association
chairman Zaldy Masita said the government should keep the 49 per cent cap for
foreign ownership in local firms ahead of 2015.
"In general, our domestic
players are not ready because there are so many issues that have yet to be
addressed by the government. Only big local firms will thrive under
liberalisation," he said.
At present, several foreign
companies own majority stakes of up to 95 per cent in local logistics firms as
they operated before the government included logistics on a list of investments
restricted for foreign entities in 2010. At present, foreign ownership is
capped at 49 per cent.
Linda Yulisman
Business & Investment Opportunities
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