The signing up of the Economic Cooperation Framework Agreement (ECFA) in June 29, 2010 between the People’s Republic of China (mainland China) and the Republic of China (Taiwan) has rejuvenated bilateral trade between both sides. ECFA is a preferential trading agreement between both parties that aims to reduce tariffs and commercial barrier between the two sides. ECFA was signed by negotiators from mainland China’s Association for Relations across the Taiwan Straits (ARATS) and Taiwan’s Strait Exchange Foundation (SEF), to promote free trade between mainland China and Taiwan.
The establishment of ECFA has initiated Taipei Economic and Trade Office (TETO) to cooperate with the Centre for Political Studies at the Indonesia Institute of Sciences (P2P LIPI) to have a half day discussion on Dynamic of Cross Strait Relations: Indonesia and Regional Perspective that was held on Monday, July 26, 2010. Head of Representative of TETO, on behalf of Mr Andrew Hsia, Mr George Li, and Head of Prospect Delegation Foundation, Ambassador Louise Tzen, were giving opening remarks. TETO presented three speakers namely Dr Mignonne Man-jung Chan of Tamkang University with the paper on ECFA: Implication for Taiwan, Cross-Strait and Regional Integration. It was followed by Dr Francis Yi-Hua Kan of National Chengchi University to present a paper on Peace and Security in East Asia after ECFA. And finally it was Ms Kristy Tsun Tzu Hsu of the Chung-Hua Institution of Economic Research who presented a paper on Prospects of Taiwan-ASEAN Countries Economic Relations after ECFA.
Prof. Dr. CPF Luhulima of the Centre for Political Studies (P2P) asked three questions on how could Taiwan capitalize on the ECFA to establish a constructive link with the ASEAN-China Free Trade Agreement. Conversely, how can Indonesia make use of the ASEAN-China Free Trade Agreement to capitalize on the ECFA. Luhulima also asked the possibility if Indonesia develop its own Small and Medium Enterprises (SMEs) based on Taiwan model. The second commentator, Agus Syarif Hidayat of the Centre for Economic Studies (P2E) delivered questions on the current Taiwan’s economy.
Despite impressive achievements and significant commitments to create free trade with Taiwan, mainland China has been successful in building a free trade with the ten member states of the Association of South East Asian Nations (ASEAN), the ASEAN-China Free Trade Area (CAFTA), which began on January 1, 2010. By having signed the ECFA with mainland China, Taiwan could, through the Framework Agreement to open up trade relations with the ASEAN states through the ASEAN-China Free Trade Area.
The ECFA will positively influence relations with their neighbouring states. Since ECFA has given more economic benefits to mainland China, it influenced South Korea to redefine economic agreement with the China. The bilateral relations between Taiwan and Japan have gotten stronger since Taiwan’s economic affairs would point to China. Mainland China will open market in eleven service sectors such as banking, securities, insurance, hospital, and accounting, while Taiwan will open wider access in seven areas including banking.
ECFA could signify Taiwan’s existence on economic affairs in the region. ECFA is not concluded by non governmental agencies, but the government of People’s Republic of China and that of Taiwan. It is Taiwan that in developing economic and commercial relations with Indonesia will have to go through Indonesia Chamber of Commerce (Kadin), and the other way around.
Taiwan’s economy is constituted by Small and Medium Enterprises (SMEs), played a very important role in the country’s job creation and maintenance of social stability. As of 2008, there were over 1,230,000 SMEs in Taiwan, employing around 7.97 million people, and accounting for 97.70% of all business enterprises in the country (White Paper on SMEs in Taiwan, 2009). In developing economic relations with Taiwan, Indonesia could develop its SMEs on the Taiwan model.
Indonesia and Taiwan have developed close trade and investment ties since 1980s and Taiwan remains the eighth largest foreign direct investment (FDI) source focusing on trade, electronics, footwear, and machineries. Conversely Indonesia had enjoyed growing export to Taiwan which its annual trade surplus had reached around USD 4 million (Kristy Hsu, 2010). Furthermore ECFA provides zero tariffs to certain imports from China including textile and machine tools, creating trade division effect and impact on certain ASEAN countries’ exports to Taiwan. ECFA provides opportunities for Taiwan to join force with ASEAN countries to export to Chinese market. (Emilia Yustiningrum)