Does MEA Benefit Indonesia? – OpEd


n early 2020, Head of Indonesian MEA had prepared to sign ASEAN Agreement on Electronic Commerce, First Protocol to Amend the ASEAN Trade in Goods Agreement, and the Protocol to Implement the Seventh Package of Commitments on Financial Services under the ASEAN Framework Agreement on Service. Even in the midst of Covid-19, ASEAN will have an annual implementation for AEC 2025. 

This fact was emphasized by the Coordinating Minister for Economic Affairs of Indonesia, Airlangga Hartarto who stated that, “In 2020, Indonesia has implemented 39% of its commitments, while at the ASEAN level it has reached 35%.” This was done as a way to restore ASEAN’s economy and implement the Industrial Revolution 4.0. Prior to that time, ASEAN has also agreed on an economic recovery framework called the ASEAN Comprehensive Recovery Framework (ACRF). 

ACRF involves 5 efforts, namely improving the health system, strengthening human resilience, maximizing the potential of the intra-ASEAN market, accelerating inclusive digitalization, and advancing towards a resilient and sustainable future. Therefore, with the continued economic integration carried out by ASEAN, some political analyzes have questioned its performance and benefits, especially for Indonesia. 

It was once said by Paolo Tavolato, Head of TMF Group Asia quoted from, stated that,”According to the Asian Economic Journal, the establishment of the AEC could generate US$280 billion to US$615 billion (equivalent to 5 to 12% of the projected ASEAN GDP) in annual economic value in by 2030 […] But given the enormous diversity in terms of economic development, political systems, cultures and religions, many question the ability of the region to truly be integrated into one unified economy.”

Moreover, MEA’s steps in global order gives impact Indonesia. 

One of the important things in looking at the performance of the AEC is to increase competitiveness in economic integration. For instance, in Buleleng, Bali, and Banyuwangi, East Java, creative economy potential has been found which is in fact generated from competitiveness to face that competitiveness again in the ASEAN market. 

Indonesia has enormous potential for natural resources and human resources in the creative economy sector. Thus, the central, regional and university governments have carried out various efforts to improve the quality of skilled workers in the tourism sector so that they can compete with skilled workers in other ASEAN tourism sectors. 

In its development, this economic integration has begun to shape domestic performance in Indonesia. This started with the increasing interest in MSME products (Micro, Small and Medium Enterprises) processed crackers in Central Java, especially in the city of Semarang, whose sales skyrocketed at the 2017 Thailand exhibition. Not only that, the AEC is also likely to have a major impact on several sectors. For example, employment, trade and investment. However, the departure of the MEA as a forum for Indonesia to play in ASEAN, experienced a polemic.

Quoting from CNN Indonesia, in mid-2020, the Head of BKPM, Bahlil Lahadalia was of the view that the Indonesian government should review its involvement in the MEA. In fact, Bahlil suggested that Indonesia should follow in the footsteps of Britain’s exit from Brexit.

Moreover, Bahlil also analyzed that with Indonesia being involved with the MEA, the investments that have been mentioned previously have not been realized.

 For example, investments from Singapore are not necessarily all through Singapore because that country could only be used as a hub for investment from other countries. This was proven when BKPM noted that investment realization from Singapore was still the largest of the total investment during the first semester of 2020. It was recorded that investment from Singapore was around US$4.67 billion, consisting of 6,508 projects. This realization occurred in the midst of the slump in Singapore’s economy. Singapore’s economic growth was recorded at minus 0.7 percent in the first quarter of 2020.

For now, the presence of the MEA has brought changes, but not significantly. This is because the MEA system is still carrying polemics. Not only that, there are still many doubts from the Indonesian people who still do not fully understand the MEA performance system for the Indonesian economy. It is also felt that the prepared human resources or workforce have not been able to compete with Malaysia and Singapore. 

Therefore, there is a need for collaboration from the Ministry of MSMEs and the Ministry of Foreign Affairs under the pretext that the Ministry of MSMEs can encourage the relevant business sector to improve the quality of its goods and services and the Ministry of Foreign Affairs can carry out powerful branding at the international level. Collaboration between these ministries is very important in considering this problem involves many parties.

Finally, with the help of synergies between the government and corporate actors, we can turn the challenges of the AEC into opportunities to seek profit, in order to achieve higher economic growth in Indonesia in the future.

*M Habib Pashya, Research Assistant, Universitas Islam Indonesia.

M Habib Pashya

M Habib Pashya is a Master's student at Universitas Gadjah Mada (UGM). His research focuses on China's foreign policy, Indonesia's foreign policy, and US-Taiwan-China relations.

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