ASEAN Economic Community Introduction

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Chapter 1 Introduction

Nowadays globalization is an undeniable trend and unlikely to be reversed. Policy directions for countries and regions have thus to be developed in the context of the global economy with pressures on national governments to address issues of free trade of goods and services, international movement of capital, technology and skills, and advancement in transportation and communication. Due to significant differences in characteristics among regions in the world, each region needs to design its own strategy on how to cope with these major challenges of globalization.

1.1 ASEAN Economic Community

In the ASEAN region, member countries have decided to establish the ASEAN Economic Community AEC by the end of 2015. The AEC envisages key characteristics of a single market and production base, a highly competitive economic region, a region of equitable economic development, and a region fully integrated into the global economy. The AEC areas of cooperation include human resources development and capacity building; recognition of professional qualifications; closer consultation on macroeconomic and financial policies; trade financing measures; enhanced infrastructure and communications connectivity; development of electronic transactions through e-ASEAN; integration of industries across the region to promote regional sourcing; and enhancement of private sector involvement in the building of the AEC. In short, in line with global trends– not without controversy– it appears that the policy intention is that the AEC will transform ASEAN into a region with free movement of goods, services, investment, and skilled labour, and freer flow of capital. In addition, the single market and production base also will include two important components, namely, the priority integration sectors, and food, agriculture and forestry [ASEAN 2008]. Twelve priority sectors have been selected for entering the ASEAN Free Trade Area AFTA, and three of them have already completed their Mutual Recognition Arrangements MRAs. Of the twelve priority sectors, the five service sectors chosen are healthcare, tourism, logistic, E-ASEAN, and air transportation. The remaining seven priority sectors selected are in goods: agro products, wooden products, rubber products, fishery, electronics, automotives, and textiles. In order to facilitate a mutual understanding of ASEAN member countries’ qualifications, and therefore assist in the mobility of workers, as well as students, among the member countries, an agreed standard has been established. In 2015, the relevant ministers of the member countries endorsed the ASEAN Qualifications Reference Framework AQRF. The AQRF consists of eight levels each described as two domains: knowledge and skills, and application and responsibility. The establishment of the Indonesian Qualification Framework was driven by national needs, as well as the country’s regional and global engagements. Nationally, Indonesia faces manpower challenges including a mismatch between professional and skills education and training outcomes and workforce needs and disparity in the quality of graduates which further exacerbates the supply of human capital for employment. Regionally, Indonesia is a signatory to the ASEAN Economic Blueprint [ASEAN 2007 which requires areas of cooperation, including the recognition of professional qualifications. Mutual Recognition Arrangements MRAs in the fields of engineering, nursing, tourism, architecture, land surveying, medical practitioners, dental practitioners, and accountancy were created, starting in 2005, to support the free flow of skilled labor through ‘harmonization and standardization’, particularly in preparation for 2 the commencement of the ASEAN Economic Community in 2015.ASEAN is also linked to the Asia–Pacific region through cross membership of Asia-Pacific Economic Cooperation APEC. In responding to its global commitments, Indonesia joined a number of international conventions in sectors including trade, economics, environment, and education. To name a few: the General Agreement on Trade in Services in1994, the World Trade Organization in1995, the ASEAN Free Trade Area in 1992, the Regional Convention on the Recognition of Studies, Diplomas and Degrees in Higher Education in Asia and the Pacific in1983. This supports Indonesian workforce mobility through four modes of supply: • Cross-border supply: the possibility for non-resident service suppliers to supply services cross- border into the member’s territory; • Consumption abroad: the freedom for the member’s residents to purchase services in the territory of another member; • Commercial presence: the opportunities for foreign service suppliers to establish, operate or expand a commercial presence in the member’s territory, such as a branch, an agency, or a wholly owned subsidiary; • Presence of natural persons: the possibilities offered for the entry and temporary stay in the member’s territory of foreign individuals in order to supply a service.

1.2 National Qualifications Framework