ASEAN Economic Integration 2015 Essay
ASEAN Economic Integration 2015
As the world today becomes more complex in term of politics and economics, there are agreements or treaties created in order to maintain the stabilization and development. One of the significant things that most states mainly concern about is the economic development; as a matter of fact, since the collapse of the Soviet Union, the world has given more priority to the economic development. On top of that, there were creations of free trade agreement among countries or regions; for instance, ASEAN was created in the purpose of regional development especially in economic. Moreover, ASEAN has proposed an objective to be succeeded in 2015 which is known as the economic integration or ASEAN Economic Community. There are three important factors that lead to the creation of ASEAN economic integration in 2015. First, ASEAN free trade area for free flow of goods is an agreement to reduce the trade barrier across the ASEAN countries, found in 1992 (The ASEAN Secretariat, 2012). At first, there were only six members of ASEAN joining and discussing about the free flow of goods during the early 1990s. In 2000, ASEAN has reached four more members such as Cambodia, Laos, Vietnam, and Myanmar, and those countries were not developed much in economic; so, as the former six members could reach the similarity development in term of economic, the proposal that was concerned over the free trade area is still existed.
It needs time for the new member states to reach the development as the ASEAN has defined the year 2015 for the economic integration, and it means that the new member states need to develop themselves until they reach the demand from the other member in productivity which it was estimated to be in 2015. Additionally, in order to reach this objective, it needs the entire new member states have higher economic growth and sign for agreement on trade. Once a country has free trade, it could lead to the international competition and also developing the country. Second, ASEAN framework agreement on services was created in order to limit the flow of services, established in 1995 and also known as the factor leading to economic integration (Hai, 2004). The aim of creating this agreement is to promote the free flow of services in the economic integration 2015. As some countries in ASEAN still need to develop, all of the member states have to cooperate well among other especially in trade and education. On top of that, technological transfer from state to state could lead to the skillful labor forces. While having skillful forces, it makes easier for state to attract the investment.
As all of the members consist of skill labors and form as a regional group, they can gain the beginning power in term of production and services. Furthermore, ASEAN will play more roles in the world economic competition on free flow of services as well as the productions. Accordingly, it could increase in service market; for instance, Singapore is one of the developed countries that is considered as the knowledge based economic which is referred to the use of services beside productions (Yue, 2001). Another factor that leads to the creation of ASEAN economic integration 2015 is the ASEAN investment agreement (AIA). It is an agreement between the member states for the open and free flow of investment throughout the region as well as to enrich the competitiveness and attraction of Direct Foreign Investment. This agreement focus on four blueprints such as progressive liberalization of investment among member states, enhancing the protection of investors and their investment, improvement of regulations to increase investment, and promotion integrated investment area.
Due to these principles, it can contribute a lot advantages to member states mainly for three aspects. First, because of the free flow of investment into the regime, ASEAN has gained the Capital increase. Even when there was the Asian Financial crisis, ASEAN remained strong with the growth of threefold accounted from US$ 23 billion in 1998 to US$ 69 billion. Obviously, the intra-ASEAN has also been expanded to US$ 10.7 million, and for the foreign direct investment, it keeps growing which accounted for US$ 30.1 billion (2012). Second, AIA is one of main causes that create jobs for most of ASEAN citizens which approximately in total of 600 million people. When there were direct foreign investments, many factories and companies consumed labor forces to work in their firm; therefore, as a result, ASEAN employment rate will rise remarkably. Last but not least, the economic development is surely achieved by the free flow of investment.
There will be advancement in any field such as infrastructures, technology, healthcare, education, etc when it comes to the accessibility to the manufacturing or services. All in all, the ASEAN investment agreement is the driving cause that provide three important benefits like increasing capital, creating more jobs, and improving economic development. After mentioning about the factors that lead to the ASEAN economic integration 2015, we can inferred that it is important for ASEAN to be ready for the economic integration 2015 as it could lead ASEAN to become a highly developed region that plays important role in the world economic.
Hai, T. C. (2004). Mutual Recognition of Surveying Qualifications within the ASEAN Framework Agreement on Services. Fig.net. Retrieved from http://www.fig.net/pub/monthly_articles/november_2004/teo_november_2004.pdf The ASEAN Secretariat. (2012). The ASEAN Free Trade Area. Asean.org. Retrieved from http://www. asean.org/communities/asean-economic-community/category/overview-10 Yue, C.S. (2001). Singapore: Towards a Knowledge-Based Economy. Retrieved fromhttp://www.d1074616.domain.com/worldcapitalinstitute/makciplatform/files/Singapore_Towards%20k-Economy_0.pdf Topic: Preparing for the ASEAN Economic Community 2015: What Can We and Government Do?
The Practice of Liberalism in the ASEAN Economic Community: Changing Challenges into Positive Opportunities for the Success of Indonesia in the ASEAN Economic Community in 2015
ASEAN Economic Community or commonly called the AEC will be realized in the next two years. AEC planned to take place in 2015. In order to realize the AEC in 2015, all ASEAN countries should liberalize trade in free movement of goods, services, investment, skilled labor, and freer flow of capital, as listed in the AEC blueprint. Based on this, the ASEAN Economic Community can be used as a container for the potential benefit for the countries incorporated in it, but on the other hand also simultaneously AEC can be a boomerang effect for countries that are not yet ready to face the AEC in 2015. Therefore, the free market which will be implemented in the 2015 AEC makes the countries who are members of ASEAN are competing to prepare its resources in order to compete and survive in a free competition because they do not want to become victims of exploitation in the AEC 2015. Indonesia as one of the countries that are members of the ASEAN community is also incorporated in this economic integration.
Preparation of Indonesia in facing the AEC 2015 which is getting closer to the finish line is interesting to discussed, given the euphoria in welcoming the 2015 AEC Indonesia is still not so pronounced, whereas the 2015 AEC will begin in two years. In this case if Indonesia does not merely want to be a spectator of the exploited towards the existence of economic integration in ASEAN (AEC), Indonesia needs to realize the integrated challenges that will be faced in the implementation of the AEC in 2015. It aims to make Indonesia can change the challenges they face into opportunities in order to get benefits due the AEC 2015. In analyzing the challenges to be faced by Indonesia, I would like to use the perspective of the theory of liberalism considering that the establishment of the AEC as a free trade area, single market aims to make ASEAN more dynamic and competitive market which is the implementation of liberalism. The liberal understanding of international political economy as an application of the theory and methodology of international economics that separates the interaction between economics and politics.
The existence of a strong and active role in the mechanism of the market has eclipsed the government authorities who are the main actors of the country. Economics and politics are two arenas are supposed to be separated and each operating according to the rules of logic and its own logic. Because liberals believe that economic factors are the determinant of all social processes and then according to them that international political economic phenomena can be explained by the various existing theories in economics. Linked to the challenges faced by Indonesia in AEC 2015 was that the implementation of the liberalism in the economic field may be adversely affected because there is no one system that was created in this world is perfect. The following are the negative impacts of the implementation of the liberalization of the economy: First liberalism in the world economy can enlarge the gap between countries. Second, liberalism will create a dependency relationship between rich countries with poor countries. Third, the market mechanism system will cause adverse monopoly power.
Fourth, Liberalism tends to bring instability in the economy. Based on the four negative impact of liberalism, we will know how the challenges faced by Indonesia significantly and further more we can know the appropriate ways in facing the challenges toward ASEAN Economic Community 2015. The first negative impact of the implementation of liberalism is liberalism in the world economy can enlarge the gap between countries. The liberalization of various sectors of the economy will create free competition in the world market. It means, when free competition occurs, then the countries that have relatively high levels of the economy will be stronger, while those with relatively low levels of the economy will be weak. In this case the economic level ASEAN countries are very diverse. Specifically, the level of economic progress in ASEAN classified into (1) a group of developed countries (Singapore), (2) a dynamic group of countries (Malaysia and Thailand), (3) group of middle-income countries (Indonesia, the Philippines and Brunei Darussalam), and (4 ) group of underdeveloped countries (Cambodia, Myanmar, Laos, Vietnam). It is unfortunate that position of Indonesia based on the economic level in ASEAN is in the group of middle income countries.
Though Indonesia to all its potential and its resources can be make itself as a big country compared to other ASEAN countries. It is caused by conditions in the Indonesian national which tends to be unstable. Not only economic, but also political stability in Indonesia was not stable Moreover when we link to the increase corruption case that lately occurred in Indonesia. So in order to overcome this problem required an integrative solution formulated by the national government to improve national conditions in Indonesia. The solution does not only focus on economic reform but also to improve political stability to run healthier. Infrastructure Improvements, reform the institutional and governance in order to have integrated coordination, and improving the quality of human resources in Indonesia are three main keys to deal the challenges faced by Indonesia in AEC 2015. Second, liberalism will create a dependency relationship between rich countries with poor countries. One problem that occurs is the policy of privatization of State Owned Enterprises (SOE)/(BUMN) a country that is purchased by a foreign country as a consequence of liberalization. Because the state “considers” itself no longer able to manage and finance the production process of the SOEs, though generally an entity or SOE firms that are closely related to lives of many people.
So it does not rule out the influence of one countries to the other countries might have a strong influence. In this case, the government should be firmly protecting state-owned property because no denying that with the ASEAN economic community of state sovereignty would fade. It must have been the challenge for Indonesia in which Indonesia should build the image of dignity as a strong state despite sharing sovereignty between ASEAN countries. Not only has the strong ability of diplomacy Indonesian government should also set up a strong military device to build an image as a big country. Third, the market mechanism system will cause adverse monopoly power. It means, if in practice a developing country cannot adapt itself to free trade competition in AEC 2015, it can be said that country would only be a victim of other major countries which are able to dominate the market. It can be ascertained that the products made in state are victims of free trade can be dead in the market. In this issue, Indonesia should know the economic actors who will compete at the AEC 2015.
Where we know that most of the Indonesian economic actors come from entrepreneurs who run Small and Medium Enterprises (SMEs). SMEs engaged in various economic activities which are now considered by all stakeholders as an important sector in addressing the problems faced by the nation’s unemployment and poverty. The role of SMEs that currently there were approximately 55 million units and businesses throughout Indonesia, not only expected to increase employment, and tackle the problem of unemployment, but it also can accelerate regional development. It implies that the role of government is no longer only help the growth of SMEs in the national level, but how to make Indonesian SMEs can compete in the global marketplace. At least, there are three main problems faced by SMEs in Indonesia: (1) the issue of financing for capital, (2) technological issues which some SMEs still have not been able to optimize existing technology, (3) marketing issues. Associated to the three problems mentioned above, the government should focus on solving the problem of SMEs in Indonesia given that economic actors in Indonesia are mostly SMEs.
The solution is intended to provide micro-credit in the financing of capital and also not forget to provide integrated technical training on the technology used and also how to market their products efficiently. Fourth, liberalism tends to bring instability in the economy. In the free trade later, AEC 2015 will lead to price volatility and exchange rates tend to be irregular. This condition will increase the uncertainty in the national economy when a country cannot use it properly. In order to maintain economic stability and to avoid improper policy making, Indonesian government who has responsibility in fiscal economy policy and Indonesian Banks as a central bank who has responsibility in monetary economic policy makers must collaborate in analyzing free market in the 2015 AEC.
In short, ASEAN Economic Community that will be implemented in the next few years is not only opportunities but also cause threats to ASEAN countries, including Indonesia. Whether Indonesia will be a state that can take the opportunity to improve their economic or otherwise become a country that is only going to become victims of exploitation for other countries is a challenge and result of Indonesia’s preparation in facing AEC 2015. Based on the perspective of liberalism, AEC 2015 which imposes free trade among ASEAN countries poses challenges to be faced by the ASEAN countries including Indonesia. These challenges can be overcome to proper preparation of the Indonesian government to national development programs that are appropriate and sustainable in the various sectors in order to achieve the success of Indonesia in the ASEAN Economic Community 2015.
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