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About ASEAN Economic Community..

ASEAN Economic Community (AEC), is an integration/unification of economic activity of the member countries of ASEAN (Association of Southeast Asian Nations), where trade and import-export activities between countries, including the movement of labor and investment, are no longer constrained by country’s regulations (or is still constrained, but the regulations are much looser than before). For example, if you go to Singapore and came home to Indonesia with a souvenir, you may have to pay import duties at the airport in Indonesia, so that some people may be unwilling to buy goods from abroad. But after this AEC applies, the duty tariff can be lowered, or even removed altogether.

And when goods from Singapore and other ASEAN countries can enter Indonesian territory without a hitch, there’s a concern that it would harm the local business which are not able to compete with those foreign products. Or, when workers from Vietnam could freely came into Indonesia, it is feared that the local workers would be kicked out of competition. Such concerns eventually make everyone not to be enthusiastic in welcoming the AEC, even though the AEC is aimed at encouraging economic development in the ASEAN region as a whole, including of course, Indonesia.

But does this AEC have no positive impact at all for Indonesia? To answer this question let us first learn the AEC in more detail.

Under the ASEAN Economic Community Blueprint, AEC is scheduled to come into force in early 2016, aka today, so that the ASEAN region is expected to: 1. Have a high competitiveness against other major regions such as China, India, or the European Union, 2. Having equitable economic development, and 3. Integrates directly with the global economy. With the free movement of labor, investment, goods, and services from one country to another in the ASEAN region, it is expected that each country will complement and strengthen its economy with one another, and ultimately enhance economic development in the ASEAN region as a whole.

Thus, the AEC will provide a chance for every ASEAN country to maximize its economic potential by taking goods/labor/investment from its neighbors, and vice versa, empower goods/labor/investment that they have by sending them out of the country. In short, instead that every country will be compete each others, they will mutually cooperate to maximize the existing economic potentials in each country, so that every country will be able to complement, not compete, each other.

For example, in the City of Batu, East Java, for its locals, the fruit of apple may have no value because it can be found almost everywhere. But after the implementation of AEC, investors from Singapore may enter the city and, by hiring experts from Malaysia, processing the apple into chips, then export it into Thailand, so that the apple will have a high value. If not because of AEC, the investors from Singapore and manpower from Malaysia can not enter into the city because of local regulations, and even if the apple chips can still be produced, it can not be exported into Thailand because of the regulatory duties there, so in the end nobody gets nothing. But since the enactment of the AEC, the investors from Singapore may invest in Batu and generate profits, chips experts from Malaysia will have a chance to use his expertise, apple farmers from Indonesia can sell their crops, and food importers in Thailand have a new product (apple chips) to be sold. Everybody’s happy! And once again, there is no competition, because all parties doing their own respective works. That’s why it was mentioned that the AEC aims to encourage economic development in the ASEAN region as a whole, including Indonesia.

The city square of Batu. If you have school-age children, you should take them to the City for educational vacation. It is a great city for tourist, I guarantee it!

Thus, although there is still a risk of increased competition between products and labor due to AEC, its positive impact will be greater. Long before AEC is applied, the countries in the ASEAN region has already introduced the ASEAN Free Trade Area (AFTA) since 1992 ago, and as a result the economy in the ASEAN region increased rapidly in subsequent years (before got hit by financial crisis in 1997). When the reach of AFTA was increased to the ASEAN China Free Trade Area and the ASEAN India Free Trade Area (free trade zone between ASEAN Countries with China and India) in 2010, the impact is also positive that Indonesia become free to export coal and CPO to China and India, and the growth of national economy hit a record of 6.9% YoY in 2011.

Looking at above facts, we could say that conomic cooperation between countries in the past have shown that AEC will also have a positive impact for the countries involved (or at least, we can hope so). And perhaps that is why President Joko Widodo, in his speech this morning related to AEC in the building of Indonesia Stock Exchange, said that the Government will not provide protection or subsidies for domestic companies because.. what kind of protection should be provided? There is no increased competition in the AEC, but instead there will be a lot of opportunities resulted from cooperation among countries. Some people who pessimistic with AEC usually mention that Indonesia, due to shortage of skilled manpower and have not been able to make downstream products to be exported, it will only be a market for goods and services from Singapore etc, but won’t being able to become a producer. And this is ridiculous: Okay, Indonesia is still not able to produce anything, but what makes you think that Thailand, Malaysia, etc., they can produce something? In term of technology advances, they are more or less no different than us! During this time, when we use a car, computer, mobile phone, etc, if not from China, Japan, or Korea, then of course it was imported from US or Europe (except Malaysia has a car with brand Proton, but its market is really small compared to Japanese Toyota, Honda, etc.). And actually that’s why the ASEAN countries must unite in economic activites, to cooperate, so that we will be able to create something valuable! Just like the apple chips above.

So, I don’t know with you guys, but I think that AEC will not deliver something negative for the national economy, instead it should be positive. However, whether it will be positive or even negative, but the effect will not be visible in the near future, but will take some time. In a few months from now, the story about this AEC will be a ‘breaking news’ once again, and that's when you should read this article once again.

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