You are on page 1of 6

Name

: Gisela Bianca

NIM

: 1701306070

Class

: 02PC3

Lecturer

: Tirta Nugraha Mursitama

ACFTA, Is It Good for Indonesia or Not?


According to neoliberalism theory, market has to be expanded and intensified. The
wider you could expand your market the more benefits you will get. This perspective sees
that everyone should get profit, no matter how big the others get but as long as you could
gain something you will satisfy. A peaceful world can be achieved through cooperation. For
instance, ACFTA could be one of this cooperation.
ASEAN-China Free Trade Area is an agreement which its purpose is to make easier
the import-export activity between ASEAN and China by reducing the trade barriers. This
liberalization of trade gives negative effect in Indonesia such as many of local companies
faced bankruptcy because their products could not compete with imported products (Ant,
2010). However, this agreement also gives benefits. In fact, based on the Central Statistics
Agency (BPS) our export increased from time to time. ACFTA gives wider opportunity to
Indonesia in selling their product. The consumers are getting bigger with the expansion of the
trade. For this reason, the writer wants to explain, Why ACFTA is actually good for
Indonesia?
In the first place, ACFTA has expanded the trading. Indonesia could get more
consumers, not only in ASEAN but we could see a chance in selling commodities in China as
he has the biggest population in the world. Second, on Indonesian side, we could see that
many of local company could not compete with imported goods. This situation should not
make us surrender but we are supposed to be more creative and innovative in making new
and better quality products with cheaper price. Last, our necessity more varied from time to
time and Indonesia is not able to accomplish it by itself. So, we still need others to fulfill our
national demand.

Before giving the evident of the arguments, furthermore the writer will explain the
concept of neoliberalism. Neoliberalism emphasizes in free trade which is not new in
1

economic world. It was all started with liberalism theory that is suggested by Adam Smith
(1723-1790) in 18th century with his Invisible Hands in The Wealth of Nations book. He
said that, state should not intervene in any market process and let the market regulate itself.
Liberalism came up as an opposition to mercantilist where there is a zero-sum game.
Otherwise, liberalism offered an idea that even if everyone compete with each other and give
his best attempt to fulfill their needs, they will not get too much power because their action
are limited by the competition. Moreover, David Ricardo (1772-1823) also added an open
market where states will help each other to pursue their national-interest and it will decrease
the chance of war.
Unfortunately, this idea made people at that time worked harder and harder to
sufficient their life and neglected their social life. Because of that, John Maynard Keynes
(1883-1946) gave solution that a state ought to support market but still in a limited part.
Market could not stand by itself because there are some matters that market could not do it
alone for example, the security of the state or mobilization of the labor.
Further, Keynesian also started running into failure as a crisis emerged in effect of
the too deep interference of the state in social welfare. Neoliberalism started to take over the
economic system. Friedrich Hayek (1899-1992) and Milton Friedman (1912-2006) came up
with their ideas about the liberalization of trade, the deregulation, and the privatization.
Hayek said that individual liberty should be protected from the threat as an outcome of state
intervention. These ideas were implemented in Thatcher and Reagan policies in their own
states. Reagan set up a supply-side economics, promote the free trade by done the
deregulation, and sold the national company to private company (Ballam & Dillman, 2014).
Consequently, states in Asia also followed neoliberalism theory like the Western
has done. Neoliberalism carried out a free trade, an activity that a state could do the trade
with other state without any tarriff and other trade barriers. ASEAN-China Free Trade Area is
one of the example of the implementation of that idea. It all started in November 2000, China
proposed a cooperation between China and ASEAN in economic and trade. A year later,
China and ASEAN signed the Framework Agreement on Comprehensive Economic
Cooperation between ASEAN and China. This agreement made ASEAN members and China
eliminated their tarriffs until 90% of their products (International Enterprise Singapore,
2012). The signing was held at November, 4th 2002 in Phnom Penh, Cambodia. Then, the
implementation of zero tarriff was started in January 1, 2010. There are 12 sectors in
2

manufacturing and the other five in the agriculture, mining and maritime sectors (ICRA
Indonesia, 2011).
As we have seen today, many of us said that this agreement gives disadvantages to
Indonesia. But, it is not actually what is happening now. Some people just see the negative
side without trying to look for the benefits and make it as a chance to go forward. Due to the
first argument that our consumers has expanded because of ACFTA. All we have seen
nowadays just ACFTA made Indonesian consumers prefer to choose imported products than
local products. It is ought to be that we could also do that by seeing the population of China,
we could also have a market in there.
According to the interview of Mr. Nugraha from Ministry of Trade Republic of
Indonesia, He said that our export increased after we joined ACFTA (see chart 1). It is based
on the statistic from Central Statistics Agency (Badan Pusat Statistik). He also said that
although Indonesia still having deficit in export, it was because of Indonesia still focus in
fulfills its national interest than do the export.
Chart 1. Indonesia Export Value (in billion US dollars) from 2000-2013

Besides, ACFTA also give good effect on Indonesias national income which increase
5,83% each year from 2009 until 2011. Whereas no improvement if Indonesia did not join
ACFTA (Setiawan, 2012). Regrettably, if this increment is compared by Chinas benefit, what
Indonesia should get is still below the expectation. So, how we could maximize our gain in
this ACFTA?
In that case, second argument will explain how we could gain more than what we
have gotten now. We could start from the internal factor, our problem is many of Indonesian
local company could not compete with imported goods. We have Indonesian National
Standard (Standar Nasional Indonesia) for imported goods and China could overcome that
3

standard. So, this is what we should do first. Our local companies have to learn about China
National Standard and we produce goods based on their standard so we could take control
over their market. According to Mrs. Astika from SMESCO, she said that to compete with
imported goods, our goods also ought to have international quality. For example, we could
not anymore sell a food just based on its taste but we have to think innovatively how the
packaging of the product, how we could do a creative marketing to introduce our goods, etc.
At the present time, government has cooperated with SMESCO to give some support
to our local companies. SMESCO has several programs that help small and medium
enterprise to compete with imported product. They gathered about 1,400 SMEs and give
some training on how to make innovative and creative products. They also have foreign
consultant in Program Produk Berdaya Saing that recreate old product into a brand new
product (Astika, 2014).
Second, we have to see the chance smartly. What happen now is many of Indonesian
product that is imported by China but China did not import it from Indonesia. For example,
China import mangosteen from other country while Indonesia is the biggest producer of
mangosteen. Moreover, we also could try export goods that we have an absolute advantage in
it when Chinas demand on that product increases. For instance, Chinas demand on coffee
start increasing by now and we know that we have an absolute advantage in coffee. So, we
should try to export more coffee to China (ARN, 2011).
Furthermore, continue to the third argument that why Indonesia should stay in
ACFTA because Indonesia still need imported goods to fulfill our national interest. As seen in
an article from Indonesia Business Daily (2014), Mr. Ari Hendarmin said that Indonesia
resource utilization for the production of raw materials is still limited. Mr. Ahmad Erani
Yustika from INDEF also added that Indonesian food demands are bigger than we could
produce and to safe the stability of food prices all we could do is done the imported activity
(Thertina, 2013).

Based on absolute and comparative advantage theory, we also do the trade because of
imported goods may have cheaper price than we could produce. In order to joining ACFTA,
we could implement this theory easier. Without any tariff, we could get imported products
cheaper and of course it will give many benefits to the consumer.
4

In conclusion, there are 3 reasons why it is good for Indonesia to join ACFTA.
Firstly, Indonesia could expand its market through ACFTA. Secondly, the competition that
appear between local and international company could make us to be more creative and
innovative in making new and better quality products with cheaper price. Thirdly, Indonesia
local product still could not suffice our national demand as a result we still need doing import
activity.

Bibliography
Ant. (2010, June 11). Satu Persen UMKM Bangkrut Akibat ACFTA. Retrieved June 2014,
from Merdeka.com: http://www.merdeka.com/ekonomi-nasional/satu-persen-umkmbangkrut-akibat-acfta.html

ARN. (2011, February 2). Perdagangan Indonesia-China. Retrieved June 2014, from
Kompas.com:
http://bisniskeuangan.kompas.com/read/2011/02/02/1153057/Perdagangan.IndonesiaChina
Astika. (2014, May 30). ACFTA. (G. Bianca, Interviewer)
Ballam, D. N., & Dillman, B. (2014). "Laissez-Faire": The Economic Liberal Perspective. In
D. N. Ballam, & B. Dillman, Introduction to International Political Economy (pp. 7376). Harlow: Pearson Education Limited.
Chandra, A. C., & Lontoh, L. A. (2011). Indonesia China Trade Relations: The deepening
of economic integration amid uncertainty? Trade Knowledge Network.
ICRA Indonesia. (2011). The Impacts of ACFTA to IndonesiaChina Trade. ICRA Indonesia
Comment.
International Enterprise Singapore. (2012, April 26). Overview of ASEAN-China (ACFTA).
Retrieved
June
2014,
from
Singapore's
FTA
Network:
http://www.fta.gov.sg/fta_acfta.asp?hl=2
Marks, S. V. (2012, September). Impact on Indonesia of the ASEAN-China Free Trade
Agreement.
Maulana, A. G. (2014, June 3). INDONESIA MANUFACTURE: Local Industry Still Has
High Dependency on Import. Retrieved June 2014, from Bisnis.com:
http://m.bisnis.com/en/read/20140603/86/28914/indonesia-manufacture-localindustry-still-has-high-dependency-on-import
Nugraha, A. G. (2014, May 28). ACFTA. (G. Bianca, Interviewer)
Setiawan, S. (2012). ASEAN-CHINA FTA: DAMPAKNYA TERHADAP EKSPOR
INDONESIA DAN CINA. Buletin Ilmiah Litbang Perdagangan.
Thertina, M. (2013, August 6). Indonesia Still Relies on Import. Retrieved June 2014, from
TEMPO.CO:
http://en.tempo.co/read/news/2013/08/06/056502798/Indonesia-StillRelies-on-Import

You might also like