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President Susilo Bambang Yudhoyono ensured Thursday the government would protect businesses, while pursuing talks with China to avoid negative impacts of the free trade deal between ASEAN and China (the ACFTA).

“We don’t want to be considered breaking the agreement that has been designed by ASEAN members.

We will talk with the Chinese government about [the ACFTA]. We will manage it as well as possible,” he told reporters Thursday at Istana Bogor in West Java after a meeting with top officials.

“On the one hand we must protect the public interest, strengthening and preparing [relevant] elements in our country.

“On the other hand we will continue cooperation with ASEAN and other partners,” he said.

The ACFTA, based on an agreement signed in 2004, becoming fully effective on Jan. 1 this year, has introduced zero tariffs on 6,682 tariff posts in 17 sectors including 12 in manufacturing and five in agriculture, mining and maritime sectors.

To help protect local industries, the House of Representatives’ commission VI overseeing industry and trade has demanded the government renegotiate 228 tariff posts covering garments, furniture and footwear, amongst others.

It has given the government six months to re-negotiate and review trade deal implementation.

Coordinating Economic Minister Hatta Rajasa confirmed the re-negotiation of the FTA was on his agenda with the President, which he said highlighted “our concerns on industries affected by the deal”.

State Cooperatives and SME Minister Syarief Hasan said that the ACFTA might cause damage to 51.3 million SMEs, which he said accounted for 99.99 percent of total businesses in the country, quoting data from the Central Statistics Agency (BPS).

SMEs employ 90.9 million workers, or 97 percent of the total workforce , he added.

According to the BPS, SMEs contribute more than half of Indonesia’s GDP of Rp 5,400 trillion.

Finance Minister Sri Mulyani Indrawati said the ACFTA would cause the government to lose Rp 1.6 trillion in import duties, although imports are expected to rise.

In 2010 it is estimated that import duties may drop to Rp 16.5 trillion from Rp 18.1 trillion last year, while the volume of imports may rise from US$95.7 billion to $132.9 billion from $95.7 billion.

The average percentage tariff levied on imports fell to 1.58 percent in 2010 down from 1.82 percent last year, she said.

But these losses will be compensated for by increasing value added tax on imported goods, estimated to increase more than 50 percent to Rp 102.2 trillion this year from Rp 66.3 trillion in 2009.

Hatta said that among the measures to help bolster local industries’ competitiveness were more support to improve infrastructure as well as fiscal incentives to those directly affected by the ACFTA agreement.

The re-negotiation was proposed by businesses as a result of fears of losing product domestic market shares to cheaper Chinese products.

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