ASEAN-China SME Conference

At the ASEAN (Association of South East Asian Nations)-China SME (Small and Medium Size Enterprise) Conference held in Kuala Lumpur, ASEAN Deputy Secretary General Pushpanathan Sundram pointed out that trade between ASEAN and China has the tendency to gradually moving toward trade in services industries. He said that all ASEAN countries must make preparation to reap a share in this cross-border trade of trade in services industries.
Manpower Resource Development
Pushpanathan said that 2010, the volume of trade in services accounted for 46 percent in the total ASEAN-China trade. He expected the percentage of trade in services between ASEAN and China will continue to gradually increase every year.
Pushpanathan also pointed out that ASEAN and China are in the midst of discussing and negotiating on the drafting of a free trade agreement relating specifically to trade in services so that in the near future, both ASEAN and China can open up more trade in services in wider areas. This is especially so now that the middle class population in China is rapidly on the increase. The increasingly large group of consumers in China will cause the demand for trade in services to increase rather than decrease in the coming years.
He added that the trade ties between ASEAN and China is not only limited on product trading alone. Cooperation between ASEAN and China in manpower resource development, banking and finance, trade in services and building construction trade cooperation have also accounted for a very important ratio.
Pushpanathan said this today [ 8 June] when he presented his keynote address on 'How Private Enterprises Can Expand Their Trade Under the ASEAN-China Free Trade Agreement.'
He believed the private enterprises are the main driver of trade cooperation in the overall ASEAN-China trade cooperation development. However, he added that there is also a need for the private enterprises to build good human resource network to connect with one another before they carry out investment cooperation projects with one another.
'As long as the private enterprises have done their liaison and networking job well, they can indeed save up a lot of investment exploration and development cost.'
The organizer for this ASEAN-China SME Conference is Datuk Dr Rebecca Fatima, Secretary-General, Ministry of International Trade and Industry. Other main speakers for this Conference have included Indonesia's Deputy Minister of State for Cooperatives and Small and Medium Enterprises Hailu, Indonesia's Chamber of Commerce President Suryo Bambang Sulisto, Thailand's Deputy Permanent Secretary General of Ministry of Commerce Pimpapaan Chansilpa, and Laos' Vice Minister of Industry and Commerce Siaosavath Savengsuksa.
Implementation and Administration Policy
At this Conference, Indonesia's Chamber of Commerce President Suryo Bambang Sulisto remarked candidly that the role of the ASEAN-China Free Trade Agreement (ACFTA) has not yet been fully utilized. The ACFTA does not even have a clear implementation and administration policy.
He said there is a need for all the ASEAN countries to establish a uniform policy for the small and medium size enterprises; a uniform policy for business standards; some ad hoc support programs, education, and online networking system to match and cater the need of different kind of businesses. He added:
'Yet for sure, the ASEAN - China Free Trade Agreement is the common goal for all governments involved. The ACFTA will certainly be implemented. It is only during the early implementation stage of ACFTA that we are still facing some guessing and exploration difficulties.'
In his address, Suryo Bambang Sulisto praised the Chinese Government for having a strong political will to promote the development of small and medium size enterprises in China. In particular, he said China has made great effort to encourage the Chinese enterprises to explore new markets. He said China's example is worth the effort for ASEAN governments to emulate.
Economic and Trade Development
However, when Thailand's Deputy Permanent Secretary General of Ministry of Commerce Pimpapaan Chansilpa addressed the participants at the ASEAN-China SME Conference, Pimpapaan Chansilpa pointed out after ASEAN as a group, China is Thailand's second largest trading partner. Thailand believed that it was a necessary procedure for all ASEAN countries to continuously carry out trade promotion and networking work with China so that ASEAN can establish an excellent and stable economic and trade development pattern with China.
Pimpapaan Chansilpa disclosed that Thailand has established nine trade offices in China. In this year alone, Thailand has organized 53 trade promotion activities in China. As such, Thailand is able to maintain close and intimate trade cooperation ties with China.
'The bilateral trade contents between Thailand and China have, in addition to the production of computers, chemicals, rubber goods, also included tourism, financial and other trade in services industries.'
Free Trade Agreement
At the ASEAN-China SME Conference, Malaysian Deputy International Trade and Industry Minister Muhkriz Mahathir also admitted that very few Malaysian firms have benefited from the trade advantage provided under the ASEAN-China Free Trade Agreement. As such, he said that the Malaysian Government will have to carry out a series of publicity activities to let Malaysia's small and medium size enterprises to gain a better understanding of the trade opportunities that the ACFTA can bring to them. He said:
'The awareness of the existence of this ACFTA by Malaysia's small and medium size enterprises is very low. As such the Malaysian Government has the responsibility to let them know how they can benefit from the ACFTA.'
He stressed that this is a continual job that has to be carried out by the Government. Currently, many products have already enjoyed tariff-free advantage but many people and many SMEs in Malaysia still do not know about these trade benefits.
'90 percent of the businesses in China and in ASEAN countries are small and medium size enterprises. As such, the small and medium size enterprises do play a very important role in the ASEAN-China trade.'
In addition, Muhkriz Mahathir also commented that some small and medium size enterprises in Malaysia have said that it was difficult for them to find suitable trading partner when they wanted to involve in ASEAN-China trade. In this regard, he said the Malaysian Government will try to look into this problem so that in the future, the small and medium size enterprises in Malaysia can find more appropriate trading partners when doing businesses with China or another country.
When asked to comment on the potential business development areas under the ACFTA, Muhkriz said currently the fastest trade growing area is in the electrical and electronic fields. But there are still other potential trade development areas in ASEAN-China trade such as those in the services industries.
ASEAN-China SME Conference
Muhkriz Mahathir said this after the opening ceremony of the ASEAN-China SME Conference held in Kuala Lumpur.
Participants at the ASEAN-China SME Conference have included Chai Xi, Chinese Ambassador to Malaysia; Datuk Hafsah Hashim, Chief Executive Officer of the SME Corporation Malaysia; Datuk Mohamed Al Amin, Chairman of SME Corporation; Datuk Michael Yeoh, Chief Executive Officer of Asian Strategy and Leadership Institute, among others.

China's Globalization: Changing International World Order

Everyone is amazed to witness the growth of China, which has become a new model for development in the world. The Chinese model is different from the process of modernization that Western countries underwent through the stages of colonialism and imperialism in the last century. In the context of regionalization, free trade and 60 years of bilateral China-Indonesia relations, China is suddenly like the elephant in the room.

Not only that, but China is seen as a threat to just about everyone, including the US, which is suffering from the worst financial and economic crisis in the 21st century. It is certain that China will transform the world in a fundamental way with a greater force than any other world power in the past two hundred years.

Recent signals from China are that its leaders in Beijing want to see China rise in this century of information technology. They stress that their determination to do so will not result in a drastic change in the global system that up to now has been dominated by the West. However, slowly but surely, China's rise is beginning to shift the position that the West has always occupied.

Growth and Development
The developed countries seem not to admit to the existence of China as the elephant in the room. The West feels that the growth and development of globalization, which is currently being driven by China, must follow universal norms, including norms of ethics, humanitarianism, democracy, human rights, liberty and other liberal norms. The West considers it impossible that a platform of socialism-communism can be capable of changing the world system that has been built over the last two centuries.

But, without realizing it, there is now an extraordinary shift in the balance of global power that is happening "sotto voce," and, in fact, is invisible. The phenomenon indicates a significant difference between the rise of China and the rise of Germany or Japan during the two world wars. The rise of China is also different from the rise of the Soviet Union during the Cold War era.

Factory Floor
Since the beginning of the opening up and reform of China's economic and trade systems in 1978, it has struggled long and hard to be accepted by the international community and to accrue all the privileges and positions that go along with being a superpower. As a newly emerging power, China is being forced to change and to accept international norms.

However, many observers and politicians around the world are gradually beginning to see China as a hidden threat and are saying that the world is approaching what they call "the coming China wars," as in the title of a book by Peter Navarro published in 2008. Navarro sees China as slowly dominating one by one the strong countries, and emerging in the midst of globalization as the world's "factory floor." Its rise is happening through misleading international trade with the use of the slogan "made-in-China price", by pricing goods as relatively cheaper than those of any other country's.

The rapid growth of China's economy over the last two decades has been triggered by its exports. The question is whether by continuing to spur exports China can sustain and achieve continuous growth in the midst of a global recession that has dampened consumer demand.

The extremely rapid growth of China's economy has never been experienced by any other country on earth. China's performance is considered unjust by some who accuse it of practicing mercantilism, including subsidizing its exports, pirating intellectual property and various other practices that are considered the props of the cheap "made-in-China price."

The interesting thing is that in the midst of dampening consumer demand, China continues to actively look for opportunities to maintain its economic growth and to widen its market networks, including looking for new centers of cooperation to prop up its own internal demand, and especially finding new energy sources.

Dominant Power
It is understandable that fears of China have been cropping up everywhere, including Southeast Asia with the coming into force of the ASEAN-China Free Trade Agreement. Many feel that it will be very difficult to compete and survive in trade and economic cooperation with China, which will tend to profit the most in that trade.

We need to understand that China will continue to have its own problems in the future, such as income inequality, sustainable development, environmental pollution, corruption and others that won't just go away. At the same time, there will be other critical points that threaten sources of fresh water or of imported oil that will force the leaders in China to come up with new ways of thinking to solve them.

China's regionalization in the Asia-Pacific region should provide interesting choices, including among them the idea put forward by Beijing of a new global currency that would de facto replace the US dollar as the international standard. China itself is actively seeking ways to gradually provide a role for the renminbi in the international arena.

Current Global Recession
It can not be avoided that China is a dominant power in the Southeast Asia region. This is the stage to make China a global power on the level of the United States. China has shown its ambitions to become the locomotive for regional growth. This is an approach to make China a market for countries in the region as well as a source of investment and technology.

Coincidentally, in the mid of the current global recession, the rise of China and the fall of the US as world powers are happening at the same time. This is causing a significant change in the balance of world economic power as well as a change in the relations between those two nations. We hope that a "changing of the guard" will not lead to a terrible shock that will endanger economic growth and trade everywhere.

China Replaces US as Second Largest Importer of Indonesian Goods

China has replaced the United States as the second largest consumer of Indonesia's nonoil exports after Japan. This has happened because of the extraordinary growth in the Chinese economy leading to a greater demand for basic materials from Indonesia. China's demand for basic materials presents an opportunity for the growth of Indonesia's agricultural industries.

Indonesia's Export Growth
Rusman Heriawan, Central Board of Statistics (BPS) chief, laid out in Jakarta on, the figures on Indonesia's exports for January 2010, which reached a value of $11.57 billion. This amount is 13.29 percent lower than exports in December 2009, but higher by 58.99 percent compared to exports a year earlier, in January 2009. Exports in January 2009 plummeted as a result of the global financial crisis that began in the middle of 2008.

The nonoil exports for January 2010 totaled $9.23 billion. Japan remains the main consumer of Indonesian exports in the amount of $1.32 billion. China is now in the second position with $1.01 billion, replacing the United States, which is now in the third position with $997.7 million, and the European Union, which consists of 27 nations, which imported $1.05 billion worth of Indonesian goods.

This is the first time that China has occupied the position of second largest importer of Indonesian goods. This represents an opportunity for Indonesia to carry out trade with China. Commodities such as unprocessed palm oil, mineral ores, rubber and furniture have the potential for growth in trade with China.

Indonesia-China Trade Ties
The trade between Indonesia and China, especially in natural commodities, has been rising for the last several years. The US market, on the other hand, has been hurt by the global financial crisis and the protectionism of its domestic market has caused Indonesian exports to that country to slowly decline.

China's need for basic commodities from Indonesia must be exploited by Indonesia to raise the level of its exports to that country. In addition to being able to increase the volume of bilateral trade with China, Indonesia could also enjoy the benefits of greater market access to countries other than China. Indonesia can use this opportunity to raise its midterm and long-term export performance.

Indonesia will get dual benefits from its trade with China. That is, to its markets and through guarantees to supply basic agro industrial materials. China is one of the largest consumers of vegetable oils in the world, beside India.

According to the Joko Supriyono, Indonesian Association of Palm Oil Manufacturers secretary general, Indonesia has the opportunity to raise its exports of unprocessed palm oil by two million tons in 2010. China now imports six million tons of unprocessed palm oil and 500,000 tons of palm kernel oil each year.

Effects of ACFTA Still Not Reflected
Export figures for January 2010 do not yet reflect the effects of the ASEAN-China Free Trade Agreement (ACFTA), which came into force on 1 January 2010. But he was optimistic that Indonesia could make use of ACFTA to increase its exports to China. Basically, if ACFTA is seen as a threat, it could have negative effects; but, these effects could be mitigated if we make good use of the opportunities before us. If our deficits keep going down, and our export and import positions equalize, then Indonesia could seize a big opportunity.

In the manufacturing sector, Indonesian products, especially textiles, will have a hard time competing with those from China. Therefore, the government needs to strengthen its industrial policies to support the manufacturing sector to increase the volume and value of exports to China. If nonoil exports rise, then Indonesia can reduce its foreign trade deficit with China, which in January 2010 reached $366 million.

Restoring Economy
Indonesia could use the opportunity to restore its economy and stimulate exports. A reviving economy will raise demand and will be an opportunity to raise prices to the level that export values of natural commodities will increase as well.

China will continue to dominate the international market. Indonesian exporters must strive to maintain their market position to obtain even greater opportunities. In my opinion, China will continue to outpace the US as a target for exports. From Indonesia's own point of view, the market has now shifted to Asia, with a relatively mature consumer market in China.