Appendix E - Tariff Impact

Summary

The impact of AFTA on regions based on the number of industries in 1993 and 2005 is not significantly different. The figures show that the number of firms that gained from tariff elimination and reduction to less than 5 per cent has declined between the years. However, there is a significant increase in the number of firms that gained from tariff reduction where the tariff is higher than 5 per cent. This indicates that AFTA significantly reduces the tariff rate for the tariff group that is higher than 5 per cent. Specifically, the sub-sectors that benefit the most are food industries (International Standard Industrial Classification/ISIC 31) and other industries, including light equipment (ISIC 39). The table indicates that the CEPT tariffs are significantly lower than the MFN tariffs — the tariff for metal products (ISIC 37) have even been eliminated since 2005 in Indonesia. The tariff on paper products (ISIC 34) had the most reduction with an average of 35 per cent in each period. Table E.4 also notes the changes in average tariff rates and growth for each sector in the manufacturing industry. From the table, it can be argued that the liberalization in Indonesian industries have started since the early 1990s, and reached its peak during the second half of the decade.