Accelerating AFTA<\/p>\n
It is understandable that Indonesia was the most surprised by
\nBrunei's call for advancing the target date of the ASEAN free
\ntrade area to the year 2000, because the nation is the least
\nprepared for the transition. No wonder, while member countries
\nsuch as Malaysia, Thailand, Singapore and the Philippines said
\nthey would seriously consider the Brunei proposal, Indonesia
\nventured a very cautious response.<\/p>\n
Indonesia, as Industry Minister Tunky Ariwibowo said early
\nthis week, will also study the proposal very carefully. But he
\ncalled for caution because the country, with a population of over
\n190 million, is the largest market among the seven-member
\nregional economic grouping.<\/p>\n
It is simply legitimate for Indonesia to judge the Brunei
\nproposal primarily by its own national interests and not by the
\nobjective of strengthening the economic competitiveness of ASEAN
\nin relation to other economic groupings.<\/p>\n
When we talk about national interests we mean the
\ncompetitiveness or survival of manufacturing companies in a free
\ntrade area where import tariffs stop at 5 percent.<\/p>\n
But Sultan Hassanal Bolkiah's proposal also makes much sense
\nin view of the keener competition from other regional groupings
\nin Asia and Latin America and even foreign investment from the
\npotentially huge economies of China and India. After all, every
\nmember has agreed that the primary objective of the ASEAN free
\ntrade area (AFTA) is, at least for the first few years, to make
\nthe region more attractive to foreign investment. Since Vietnam
\nwas inducted last week, AFTA creates an inconceivable common
\nmarket of 420 million people.<\/p>\n
But geographical proximity is not the most important
\nprecondition for creating a free trade area. The stage of
\neconomic development or economic competitiveness of the members
\nis the most crucial factor. It is therefore common within a
\nregional economic grouping that the pace of its cooperation
\nprograms is determined by the least developed member, in this
\ncase Indonesia -- which also happens to be the largest potential
\nmarket.<\/p>\n
We saw it as very significant progress when Indonesia agreed
\nto advance the creation of AFTA from its original target of 2005
\nto 2003, as agreed by the ASEAN summit in Singapore in January
\n1992. It is also encouraging to note that Indonesia is truly
\ncommitted to the new AFTA time table, as shown by its May package
\nof economic reform measures which firmly schedules the gradual
\nreduction of all import tariffs to a maximum of 5 percent by the
\nyear 2003.<\/p>\n
AFTA could actually be used by Indonesian companies to test
\ntheir competitiveness before entering more developed markets.<\/p>\n
But the proposal for further accelerating the AFTA time table
\nby three years seems to be unfeasible. Indonesia has introduced
\nnumerous reform packages to improve the efficiency and
\ncompetitiveness of its economy. But a great deal more has yet to
\nbe done to further improve its economic efficiency to be on par
\nwith other ASEAN countries.<\/p>\n
Other ASEAN members should also realize that the cause of
\nIndonesia's high-cost economy, such as arduous licensing,
\nbureaucratic inefficiency which borders on inertia, inadequate
\nphysical infrastructure, and market distortions such as quasi-
\nmonopolies and oligopolies, are not merely economic problems.<\/p>\n
Many market barriers in Indonesia are more political in
\nnature. Therefore, the pace of economic reform is often not
\ndictated by economic imperatives like international competition,
\nbut by what the highest political leaders' perceive to be
\npolitically feasible right now and what they believe should be
\npostponed.<\/p>",
"url": "https:\/\/jawawa.id\/newsitem\/accelerating-afta-1447893297",
"image": ""
},
"sponsor": "Okusi Associates",
"sponsor_url": "https:\/\/okusiassociates.com"
}