AFTA? What's AFTA?
AFTA? What's AFTA?
A new free trade arrangement involving Indonesia and five
other Southeast Asian countries was born on New Year's Day, but
few people in the region are even aware of its existence. You
would be hard pressed to find anyone in Indonesia able to tell
you what AFTA stands for, let alone explain how it affect their
lives. (AFTA is the ASEAN Free Trade Area, though many people
erroneously call it the ASEAN Free Trade Agreement).
Given that AFTA marks the first step toward the formation of a
common market, it is lamentable that there was not a single
public announcement before or after its launching. Economic
ministers ignored it and President Megawati Soekarnoputri did not
even touch on the issue in her New Year's speech.
For something as significant as the start of a free trade, the
government's approach has been simply appalling. Having made the
commitment to form a free trade area with other nations, the
government should have informed the public of its consequences,
covering both the upsides and the downsides of free trade.
In theory, removing barriers to trade should bring immense
benefits to the people. It leads to greater specialization and
division of labor as each country will concentrate on producing
goods and services in which they have a competitive advantage.
Free trade leads to greater efficiency and cheaper products.
There is another compelling reason why AFTA is important now:
the rise of China's economic hegemony. Collectively, ASEAN stands
a better chance of competing against the might of China than if
its members were to try to compete individually.
On the downside, the greater levels of competition AFTA
unleashes will lead to bankruptcy for inefficient companies that
have been hiding behind protectionist barriers. Not surprisingly,
opposition to free trade has come from business and labor groups.
For better or worse, AFTA will have a major impact on the
lives of people in Indonesia. While theoretically free trade
benefits the entire community, there will be some losers too.
The launching of AFTA on Tuesday may be considered modest, for
it involves only six of ASEAN's 10 members, and does not cover
all products and services. Call it a 'soft' launching, but the
government still owes it to the people to prepare them better for
the changes ahead.
Instead, AFTA came almost unannounced, and much like the
terrorist attacks on America in September, it could hit some
people particularly badly because we were totally unprepared.