Jul 21, 2014

Indonesia - Is ASEAN Economic Community a top Jokowi priority?

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Eight credible opinion survey agencies (via quick counts) have put Joko “Jokowi” Widodo and Jusuf Kalla as the winners of the Indonesian presidential election. Of course, we have to wait until July 22 for official announcement from the General Elections Commission (KPU). But we can ask now whether the ASEAN Economic Community (AEC), which is scheduled to materialize at the end of 2015, will be included in Jokowi’s top work priorities.

The new Indonesian president will determine whether Indonesia will be a leader or instead a victim of ASEAN policies.

Neither of the two candidates (Prabowo Subianto being the other) has ever rejected the integration process. Jokowi and Prabowo believe that ASEAN is important for Indonesian welfare and its economy. In the second presidential debate, Prabowo asked Jokowi about the potentially massive inflow of foreign products and services to Indonesia that will come with the AEC and Jokowi mentioned that Indonesian companies must fight to gain a bigger international market share. He argued further that in order to protect local business, he would expedite the licensing and administrative process for local or domestic investors.

Foreign investors should not be anxious about these comments. During the campaign, the candidates had to offer much nationalist rhetoric to gain votes from their constituents. Looking at Jokowi’s past history and experience as Surakarta mayor and Jakarta governor, it is less likely there will be extreme trade protectionist policies.

There are three problems we can discuss. The first problem is Jokowi’s focus on national domestic issues. Second is the Indonesian competitiveness index in ASEAN, and lastly, the ASEAN Secretariat’s role.

It is understandable that in the first year of his presidency Jokowi will be very busy with domestic issues. He has to struggle to gain approval from the opposition factions in the House. Prabowo’s coalition won a majority of seats in the House with 59.12 percent of the total. Jokowi would need approval from the opposition parties to realize his promises, such as cutting the fuel subsidy and budget deficit, building infrastructure, establishing Indonesia’s healthcare system, improving education and accelerating bureaucratic reform.

Secondly, Jokowi must act immediately to increase Indonesian economic and business competitiveness in facing tougher competition in the ASEAN integration process. For example, Indonesian small and medium enterprises (SMEs), which contributed 57 percent to GDP and employ the majority of the Indonesian workforce, are very vulnerable to be crushed by multinational companies and other ASEAN SMEs. Based on the ASEAN SME Policy Index compiled by the Economic Research Institute for ASEAN and East Asia, Indonesian SMEs are still underdeveloped in areas such as financing, technology and technology transfers, and in effective representation of SMEs’ interest.

Moreover, the Indonesian workforce has to be ready to compete with other ASEAN countries. Architects, nurses, engineers and accountants are included as critical professions for labor market integration. How many Indonesian architects or nurses are there who speak English well? We need to seriously question the quality of the Indonesian workforce in comparison with other ASEAN countries.

Therefore, Jokowi needs to have a comprehensive strategy to secure Indonesian national interests in the ASEAN Economic Community. Actually, President Susilo Bambang Yudhoyono issued Presidential Decree No. 11 in 2011 regarding the implementation of the ASEAN Economic Community Blueprint. The blueprint is being implemented by 27 Indonesian ministries and bodies.

If all responsible ministries and bodies implement the blueprint, we do not need to worry about Indonesian readiness. The blueprint advises many specific programs to empower SMEs and for the Indonesian workforce to be ready for ASEAN competition.

For example, the presidential decree ordered the cooperatives and SMEs ministries to establish forums to facilitate cooperation between Indonesian SMEs and other ASEAN SMEs. However, lack of coordination between Indonesian agencies and bodies is a major obstacle for the full implementation of the blueprint.

Here the ASEAN Secretariat (ASEC) can play its role as the information hub for the Indonesian leaders. ASEAN Charter Article 11, point 2 (b) stipulates the ASEAN secretary-general has the responsibility to facilitate and monitor progress in the implementation of ASEAN agreements and decisions and submit an annual report on the work of ASEAN to the ASEAN leaders.

However, ASEC is too small for its current mandate. Its annual budget of about US$15 million is far below the European Commission’s operating budget of over $200 billion in 2012. The 260 staff members in ASEC will not be able to manage all the complex and vast problems of 600 million ASEAN citizens. ASEAN member states, especially Indonesia, need to seriously put more financial and human resources to ASEC for more effective monitoring and facilitation.

The author agrees that ASEAN single market integration is inevitable. However, it is important to ensure Indonesian readiness to compete with other nations. Despite limited time to implement the ASEAN Blueprint, there is still hope that the next president can produce breakthrough innovation to ensure Indonesian interest in the AEC.

Verdinand Robertua

The writer is a lecturer in the International Relations Department at the Christian University of Indonesia (UKI) and a researcher at the Marthinus Academy and UKI Center for Security and Foreign Affairs (CESFAS).

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