Unless Indonesia gets its act together soon, it will not be fully ready
for the Asean Economic Community (AEC) in 2015. If so, it is likely that we
will see a repetition of what happened when the China-Asean Free Trade
Agreement (Caftan) came into force in 2010 with the Indonesian Chamber of
Commerce and Industry calling for a postponement of implementation.
Fearing huge domestic losses, then Industry Minister
Fahmi Idris announced his intentions to ask President Susilo Bambang Yudhoyono
to consider delaying the implementation of the free trade agreement (FTA).
Fahmi insisted that the FTA— which was expected to
open up various sectors in both markets (China and Asean) through the gradual
reduction of import duty tariffs—would bring Indonesia more harm than good,
given China’s superiority over Indonesia in terms of competitiveness.
With regards to the AEC, Indonesia has already
succeeded in getting it launched at the end of 2015, instead of at the beginning
of the year. But looking at Indonesia’s progress, it is likely that another
postponement will be called for.
Indonesia, with its huge market of 250 million makes
it the largest economy in the region. However, local sentiments are such that
it is also the least able to compete, judging from the state of its own
manufacturing sector, and therefore will have the most to lose under the AEC.
Even its most lucrative sectors, i.e. textiles, garments, electronics and
automotive, will face fierce competition from other Asian states because of the
number of jobs these sectors generate.
It does not help that xenophobia will grow as
Indonesia will soon enter an election year. We are already seeing this trend
among foreign companies. We have not seen any election candidates exploiting
AEC as a threat to the Indonesian economy, but the issue will soon be too
tempting for them to ignore.
Poor preparation for the AEC is a reflection of the
lack of political leadership by the government. Yudhoyono has repeatedly
reiterated the need for the country to prepare for AEC. But his words have not
been translated into action, and in Indonesia, the AEC remains an alien concept
while time is running out.
The media, which should know better, is lukewarm at
best in its efforts to promote the idea. This is unfortunate, because the media
is a key player in helping prepare the country for the AEC.
Eventually the nation will no longer be able to ignore
the issue. But when the time comes, can an unprepared Indonesia open up its
economy to be a part of AEC?
A long way to go before the removal of non-tariff barriers
Local businessmen fear that other Asean markets will
edge their businesses out, while analysts are pessimistic about a full launch
of AEC.
An ill-prepared Indonesia, they say, will likely drag
the entire regional community down once AEC is implemented. These are some of
the factors showing that Indonesia has much work to do before it can be
considered prepared for AEC:
— Indonesian businesses still bear the highest
logistics costs and credit interest rates in the region, and this has weakened
its competitiveness against other member states.
— The most that can be said about Indonesia’s
preparedness for AEC are “low-hanging fruit” such as tariff reduction. Bigger
building blocks—non-tariff barriers like quality standards and customs
clearance procedures—are still “under construction”. A single market and
production platform like AEC would demand more than just the removal of import
tariffs.
The removal of non-tariff barriers like technical and
safety standards, different customs-clearance procedures, transit transport
system, rules of origin and conformity assessment practices, is undoubtedly
challenging and complex. They require institutional capacity building in each
country.
Another example of how ill-prepared Indonesia is can
be seen in the time it takes for in-bound containers to get clearance at the
Tanjung Priok port in Jakarta which handles two-thirds of the country’s
external trade: despite the introduction of a “single window” to simplify the
processing of all shipping documents and import-export clearances, it still
takes the containers about 10 days.
A simplified procedure for exporters to obtain a
Certificate of Origin (CO) for their products is needed for businesses to enjoy
the zero-tariff facility already implemented under the FTA. However, in
Indonesia, bureaucracy often stands in the way as issuing of the CO is still
under the jurisdiction of the trade ministry, leaving the zero-tariff facility
underutilised. Recent data showed that only 30 per cent of Indonesia’s exports
to other Asean members have made use of the zero-tariff.
Benefits such as zero-tariff barriers would be
pointless if technical and assessment standards, customs procedures, and rules
for product registration and labelling are not streamlined. Rather, they may
even incur higher distribution costs.
Another challenge to AEC is creating a level playing
field in the region to ensure customer protection, quality of goods, alignment
of local standards to international standards, so that there is mutual
recognition of the arrangements made between states.
Education, language and enforcement
Some of the areas found wanting in Indonesia,
especially in the context of AEC, are education, language-skills and
enforcement.
While AEC is expected to open up more opportunities,
and see more rapid movement of professionals between member states, many
Indonesians may find themselves unqualified to join the flow.
National statistics show that out of the 121
million-strong workforce, over 7 million, or 5.8 per cent are unemployed. Many
of those without jobs are unskilled and uneducated, but some of them are degree
holders.
The Asean University Network, which was started in
1995, saw student exchanges, scholarships and credit transfers offered between
universities in the region. Indonesia’s public tertiary institutions of higher
learning, such as the University of Indonesia, Gadjah Mada University in
Yogyakarta, Airlangga University in Surabaya, and the Bandung Institute of
Technology are still lagging behind the top 50 universities in Asia and
therefore not attracting many foreign students.
That said, the Bali government seems to be the only
one actively engaging in preparations for the AEC—at least in the area of
hospitality. Its governor Made Mangku Pastika has already notified locals to be
ready to compete with various nationalities for jobs (on the island province).
“The (provincial) government cannot, and will not,
stop the inflow of professionals from other Asean countries into Bali,” Pastika
told university students.
As Bali depends heavily on tourism, the Udayana
University requires its graduates to have a score of at least 400 in their Test
of English as a Foreign Language (Toefl), while all tour guides are encouraged
to be certified.
Febbylia Danita who works in a fashion retail outlet
in Denpasar, Bali, says that in terms of skill, Indonesians are as competitive
as their counterparts in the region. But their main handicap, says the
30-year-old, is their lack of confidence.
Senior nurse Siti Komariah says that poor command of
English and inability to “think critically” lends to this low self-confidence.
Another obstacle, particularly in the nursing
industry, says Siti, is the lack of specialist training platforms.
The number of nursing academies offering diploma
programmes have increased with the number of hospitals in the country. With
these diplomas, graduates are able to work as paramedics, if not as nurses.
However, she notes, they do not qualify regionally.
Singapore and the Philippines require their nurses to have at least bachelor
degrees. Furthermore, only the major universities in Indonesia offer courses
for nursing specialties.
She hopes that the nursing law which has been drafted
will be passed ahead of AEC 2015, as all agreements made between member
countries on the facilitated entry of professionals will be based on the
regulations of the individual host countries.
Nevertheless, of the informed, many are looking
forward the open doors AEC will provide them.
Abdul Mukti Syaubari, formerly an Indonesian who now
holds a Malaysian passport, says that he would like to start a business in his
hometown in Sumatra. For now, being a Malaysian citizen makes it difficult for
him to obtain a visa for a long stay in Indonesia, let alone start a business.
But a borderless Asean community, he says, would enable him to fulfil his
dream.
Asean as a people centred-community: too good to be true?
Thanks in part to the booming aviation industry, in
particular low-cost carriers, millions of people in Southeast Asia can now
afford to travel within the region.
The cities of Southeast Asia are connected to each by
only a few hours by flight, a journey that was considered a luxury a few
decades ago.
The Soekarno-Hatta airport in Jakarta clearly shows
that the rapid movement of citizens across the region, and other Indonesian
cities are quickly catching up.
Besides affordable air travel, technology has
connected people like never before. This has opened up avenues for sharing
ideas, building mutual trust and even enforced international solidarity for a
common cause.
It is also worth noting that the region is also seeing
a middle class that is growing at an unprecedented pace.
Much has been done to bring together the Asean
nations. For example, regular forums like the Asean Ministerial Meeting on
Youth, the Asean Committee on Women, the Asean Education Ministers Meeting,
Asean Foundation programmes; or in the field of sports—the Southeast Asian
(SEA) Games and Asean Football
Federation Cup.
The SEA Games is perhaps the most prominent event.
Hosted bi-annually by Asean member countries in alphabetical order, the joint
sports event has motivated the organising of other smaller-scale sports events
and competitions, particularly in football.
Nevertheless, Asean as a community needs more than
just regular routine events. It has to find other common grounds that will make
the grouping relevant. Non-governmental organisations and groups representing
civil society play a leading role in the search for unifying causes.
Take for example the Asean Civil Society Conference,
which usually gathers representatives of NGOs from across Asean member states
ahead of the annual regional leaders meeting.
Having been held nine times, the conference is deemed
a “genuine” forum where the concerns of the region’s civil society groups are
brought to the attention of the relevant heads of state. During the conference
participants take part in a series of plenary sessions and workshops to discuss
various regional issues and draft a “People’s Statement” that they will address
to Asean leaders.
But the conference has never been free from attempts
by the host government to intervene. The eighth conference in Phnom Penh last
year saw the host Cambodian government and other Asean governments support a
rival event called the Asean People’s Forum, as proven in the transfer of 30
Laotian delegates to the breakaway event.
To make matters worse, the management of the hotel
where the Asean Civil Society Conference was held threatened to cut the power
if the conference organisers went ahead with their plan to hold a workshop on
human rights issues in Myanmar.
The latest conference in Bandar Seri Begawan, Brunei,
in April was also marred by an unfortunate incident. Indonesian representative
Yuyun Wahyuningrum was banned from addressing delegates at the event on the
Asean vision on human rights, because she had earlier publicly criticised the
Brunei government.
What appalled Yuyun and her fellow human rights
workers was the fact that the initiative came not from the Brunei government,
but the organising committee, which was made up of local civil society
organisations. This “self-censorship” should not come as a surprise given the
different norms and values in each member state.
Incidents that tainted the last two Asean people’s
conference have only showed that the grouping has much work to do, so that
these issues will not become a hindrance in establishing a people-centred Asean
community envisioned in the Declaration of Asean Concord (Bali Concord II) in
2003.
In a wider perspective, the regional group’s
commitment to democratic norms and protection of human rights enshrined in the
Asean Charter in 2008 remains a question that has not been adequately
addressed.
Indeed Asean comprises nations that are diverse in how
they view citizens’ freedom and human rights. However, it is safe to say that
until all the member states can see eye-to-eye on this issue, among others,
Asean will remain an elite-centred organisation where those in places of
authority or advantage will feel free to impose their will on the people.
Kornelius Purba, Ati Nurbaiti, Vincent Lingga, Dwi
Atmanta
Asia News Network
Business & Investment Opportunities
Saigon Business Corporation Pte Ltd (SBC) is incorporated
in Singapore since 1994.
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