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Rural Infrastructure Lacking: Kadin
Shirley Christie | April 08, 2011

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Local governments must pay more attention to rural infrastructure development to help businesses cut costs and compete with cheap imports, the Indonesian Chamber of Commerce and Industry said on Friday.

Suryo Bambang Sulisto, chairman of the chamber, also known as Kadin, said rural regions lacked adequate infrastructure such as highways and ports to help businesses grow faster, leaving them vulnerable to cheap imports.

“We are really concerned about this,” Suryo said. He urged the central government to team up with Kadin to figure out ways to protect local industries that employ millions of workers.

Poor infrastructure has left Indonesia with a high-cost economy, analysts have said, forcing producers to spend more to create and transport their goods.

Indonesian manufacturers have raised concerns about Chinese goods since the Asean-China free trade agreement went into effect more than a year ago.

An Industry Ministry study of 11 major cities showed local producers, especially those in textiles, electronics, furniture, metals and machinery, struggling to deal with the added competition.

As part of the pact, China and the 10 Asean member states must scrap tariffs on about 90 percent of goods. Duties must be cut to no more than 50 percent on “highly sensitive” items by 2015.

However, local producers have criticized the FTA, saying the balance of trade favors China as Indonesia has failed to strengthen its domestic industry.

Natsir Mansyur, vice chairman of trade, distribution and logistics at Kadin, said China had violated several terms of the FTA, such as using the US dollar as its currency instead of yuan or rupiah and refusing to exchange information with Indonesia.

“Our trade deficit with China was Rp 5.6 trillion [$650 million] last year. Now, it has increased to Rp 6.3 trillion,” Natsir said.

Industry Minister MS Hidayat said on Wednesday that the government would move to protect local producers, but Natsir had little hope of concrete action.

Kadin and the Regional Representatives Council (DPD) have pledged to help increase competitiveness in rural areas. “[The hurdles] are mostly infrastructure and overlapping bureaucracy. All classic problems, really,” DPD chairman Irman Gusman said.