Irawan Debates on regionalism Reference 2002
By panicipating in the wTO and APEC, the total welfarc of ASBAN conntries will increa6d by US$
3.9 billion. On the other side, witb their palticipation in the WTO and APEC, tbe imPlementation of
AFIA will create minimal additional benefit for ASEAN countries by around US$ 242 million. In his
study, it is estimated that lndonesia's welfare wil incrcase by around US $ 225 million which is mrrch
higher than the US$ ?0 million that Indonesia would have gained ftom UruSuay Round and APEC
liberalization (Feridhanusetyawan, 1998: p.10).
In employfnent, Indonesia as a labor abundant country will benefit from the develoPment of laborintensive industries. It is, as in Feridhanusetyawat (1998: p.l2), because the movement of resources
from the primary sectors to mzrnufacturing sectors is well pronounced in Indorcsia, due to global lrade
liberalization following the WTO, APF!, and AFIA. Feridhanustyawan (1998: p l2) estimates that tbe
sectors that will experience output inoeases are forestry Oy 4%), textile and garment (by 7 percent), and
resource-based manufacturing (by 6%).
It is mentioned in a WIO report on Indonesia's tmde policies and Practices (Trade Policy Review,
December 1998) that since 1994Indonesia has significantly reductd its apPlied tariffs, with the lowering
of rates going well beyond Indonesia's WTo coinmitmentsr . Indonesia committed itself to reduce the
maximum applied tariff for all products to l0% bry 2003. Beyond tariff reduction, Indonesia has undertaken to remove all non-tariff bariels and export restrictions. However, despite all these lndonesia's
consistent trade policies with WTO agenda, the report raised a concem over high tariffs clntinually
employed to protect bevemges, motor vehicles and texiiles, and clothing.
Another concem raised in the report is that while Indonesia's investment regime is now open, the
increasint use of tax incentives for investment should be closely considered. Such a Policy tends to
create over-investment in non-competitive sectors, forego more tax levedues under severe budget constraint. and encourage regional tax competition.
lV, Conclusion
We can see from the case studies of both countries that each countries has different reasons for
committing to a regional trade agreement as well as to a multilateral organisation like wTO. In the case
of Singapore, given its lack of domestic mar*et, it seeks agressively for rnultilateral trade and it uses
regional groupings such as the ASEAN and AFTA to prcmote its cause. However, for lndonesi4 a larger
countries with several sectors of it economy which rnay not be able to compete intemationally, the pros
and cons of multilateml trade is oot as clear. What is more important fot lndonesia, is to provide a stable
and predictable climate for trade which can induce more foreign investment. It has to have enough
political wilt to lead its industries out ofthe recent financial meltdown.
REFERENCES
Adi, Sutjahjo. I 994. "The Establishmenl of AFTA and Impact to Indonesia
Economy". Unpublished master thesis. University of Nevada, Reno.
AFTA Reader 1993. Asean Secretariat. Jakarta.
Athukorala, Prema-Chandra a.d Jayant Menon. 1996. "Foreign Dircct Investment in ASEAN: Can AFIA
Make a Difference?". A FTA in tha Chahging Intertuttiotnl Economy, p. ?6-94. Institute of
Southeast Asian Studies, Singapore.
SINREM I - Surubata, 29 Juni
2N2
II
RIIATE
sEllt-tr t
rifr:iko=noni uonerer/Peftanka Etononi tntemasiow!/xeunean
Baldwin, Richard. f99?. '"The Causes ofRegiona.listr,," The
Berysten, Fr€d. 1997. "Open Regionalism", in
wo
Internosialal
d Economy
frE WoM Economy,t.2O'n
$IIlEJtrI
v.22,n.5' p.865-888
5' p. 545-565.
Chirathivat, Suthipand. 1996. "ASEAN Economic Integation wiih the World through AFrA" ,4FfA tn
the Changing Intera4tional Econom\ p. 2l-4l lnstitute of Southeast Asian studies'
Singaporc.
Feridhanusetyawan, Tlbagus. 1998. "The Impact o{ Tlade Liberalization on Welfare and Employment
in ASEAN". Wor*ing Paper 98.05. Australian Centre for Intemational Agricuhural Research (ACIAR)-Indonesia Research Project, Adelaide.
"Regionalism in Place of or Together with Multilatemlism: Changes and
Conflicts for the wotld Trading system". Spe€ch delivered on 9 July at the Economic society of Singaporc. SingapoE.
Langhammer,
Rolf. l9D.
Lawrence, Robert. Z. 1994. "Regionalism: An Ovewie*". Journal ofthe JaPanese and ln@rnational
Economies, v.8, n.4, p.365-81 .
Luhufima, C.PF. f994. "lndonesia 8nd the I'PEC Yision", Indonesian Perspectives on APEC ana Rc'
gional coopemtio in Asia Pacific, p. l4l-48. Centre for strategic and Intemational studies, Jaka(a.
NainStolan, Paifan. | 994. "APEC and Trade Fer,ililarion" Indonesian Perspectives on APEC and Re'
Biotal coopemtion in Asia Pacific, p.62-68. Centre for Strategic and International Studies,
Jakarta.
Panagariya. Arvind. 1999, Regionalistn in Trade Policy
-
Essals on Preferential Trading, SinS Pote:
world Scientific.
Pangestu, Mari. 1994. "Regional Economic Coopeotion As a$ Inslrument for Economic Development:
An Asian PeNpective". Indonesian Perspeaives on APEC and Regiornl Cooperation in
Asia Pacific, p.205-23. Cenfie for Stmlegic and lntemational Studies, Jakarta.
Trude Poticy Review,December 1998, World Trade Organization, Switzerland.
smith, Anthony. 1999. "lndonesia's Role in ASEANi The End of lradership?". cont€mporary Soulbeast Asia, v.21, n.2, August, P. 238-60.
'ASEAN Trade Liberaliz.tion in the Regional and Clobal Context". Indonesian
Percpectives on APEC anl Regional Cooperation in Asia PaciJic, p. 224-59 Centrc for
Soesastro, Hadi. | 994.
strategic and lntemational Studies, Jakarta.
srdtr
7imer, october 4, 2000
Toh Mun Heng and Linda Low. 1993. "Is the ASEAN Free Tmde Area a Second Besl oPtion?" Ariax
Economic Jounal,,t.7,n.3, p, 275-98.
Websiles
ASEAN Secrctariafs Website at < gggtgtealscc.grg >
Horvard's Website at <
gggci@
lndonesian Central Burcau ofstatistics' Website
>
at < !fgy,!ps,ip,id >
I
'?
Indonesian central Bur€au of Statistics' website at <
rgrlbplJgid
>
Feridhanusetyawan employs global computable general equilibrium model to estimate th€ impact of
intemational trade liberalization on changc in welfarE, outputs by s€ctor, a||d employment in ASEAN
counries.
I It is explained by the report that lndonesia has reduced its applied MFN tariffs from unweighted
average of about 20% in 1994 to 9.5% in 1998. In 1998, Indonesia reduced tariffs on food items to
a maximum of5%.
SINREM I - Surabav. 29
Jmi 20U
3.9 billion. On the other side, witb their palticipation in the WTO and APEC, tbe imPlementation of
AFIA will create minimal additional benefit for ASEAN countries by around US$ 242 million. In his
study, it is estimated that lndonesia's welfare wil incrcase by around US $ 225 million which is mrrch
higher than the US$ ?0 million that Indonesia would have gained ftom UruSuay Round and APEC
liberalization (Feridhanusetyawan, 1998: p.10).
In employfnent, Indonesia as a labor abundant country will benefit from the develoPment of laborintensive industries. It is, as in Feridhanusetyawat (1998: p.l2), because the movement of resources
from the primary sectors to mzrnufacturing sectors is well pronounced in Indorcsia, due to global lrade
liberalization following the WTO, APF!, and AFIA. Feridhanustyawan (1998: p l2) estimates that tbe
sectors that will experience output inoeases are forestry Oy 4%), textile and garment (by 7 percent), and
resource-based manufacturing (by 6%).
It is mentioned in a WIO report on Indonesia's tmde policies and Practices (Trade Policy Review,
December 1998) that since 1994Indonesia has significantly reductd its apPlied tariffs, with the lowering
of rates going well beyond Indonesia's WTo coinmitmentsr . Indonesia committed itself to reduce the
maximum applied tariff for all products to l0% bry 2003. Beyond tariff reduction, Indonesia has undertaken to remove all non-tariff bariels and export restrictions. However, despite all these lndonesia's
consistent trade policies with WTO agenda, the report raised a concem over high tariffs clntinually
employed to protect bevemges, motor vehicles and texiiles, and clothing.
Another concem raised in the report is that while Indonesia's investment regime is now open, the
increasint use of tax incentives for investment should be closely considered. Such a Policy tends to
create over-investment in non-competitive sectors, forego more tax levedues under severe budget constraint. and encourage regional tax competition.
lV, Conclusion
We can see from the case studies of both countries that each countries has different reasons for
committing to a regional trade agreement as well as to a multilateral organisation like wTO. In the case
of Singapore, given its lack of domestic mar*et, it seeks agressively for rnultilateral trade and it uses
regional groupings such as the ASEAN and AFTA to prcmote its cause. However, for lndonesi4 a larger
countries with several sectors of it economy which rnay not be able to compete intemationally, the pros
and cons of multilateml trade is oot as clear. What is more important fot lndonesia, is to provide a stable
and predictable climate for trade which can induce more foreign investment. It has to have enough
political wilt to lead its industries out ofthe recent financial meltdown.
REFERENCES
Adi, Sutjahjo. I 994. "The Establishmenl of AFTA and Impact to Indonesia
Economy". Unpublished master thesis. University of Nevada, Reno.
AFTA Reader 1993. Asean Secretariat. Jakarta.
Athukorala, Prema-Chandra a.d Jayant Menon. 1996. "Foreign Dircct Investment in ASEAN: Can AFIA
Make a Difference?". A FTA in tha Chahging Intertuttiotnl Economy, p. ?6-94. Institute of
Southeast Asian Studies, Singapore.
SINREM I - Surubata, 29 Juni
2N2
II
RIIATE
sEllt-tr t
rifr:iko=noni uonerer/Peftanka Etononi tntemasiow!/xeunean
Baldwin, Richard. f99?. '"The Causes ofRegiona.listr,," The
Berysten, Fr€d. 1997. "Open Regionalism", in
wo
Internosialal
d Economy
frE WoM Economy,t.2O'n
$IIlEJtrI
v.22,n.5' p.865-888
5' p. 545-565.
Chirathivat, Suthipand. 1996. "ASEAN Economic Integation wiih the World through AFrA" ,4FfA tn
the Changing Intera4tional Econom\ p. 2l-4l lnstitute of Southeast Asian studies'
Singaporc.
Feridhanusetyawan, Tlbagus. 1998. "The Impact o{ Tlade Liberalization on Welfare and Employment
in ASEAN". Wor*ing Paper 98.05. Australian Centre for Intemational Agricuhural Research (ACIAR)-Indonesia Research Project, Adelaide.
"Regionalism in Place of or Together with Multilatemlism: Changes and
Conflicts for the wotld Trading system". Spe€ch delivered on 9 July at the Economic society of Singaporc. SingapoE.
Langhammer,
Rolf. l9D.
Lawrence, Robert. Z. 1994. "Regionalism: An Ovewie*". Journal ofthe JaPanese and ln@rnational
Economies, v.8, n.4, p.365-81 .
Luhufima, C.PF. f994. "lndonesia 8nd the I'PEC Yision", Indonesian Perspectives on APEC ana Rc'
gional coopemtio in Asia Pacific, p. l4l-48. Centre for strategic and Intemational studies, Jaka(a.
NainStolan, Paifan. | 994. "APEC and Trade Fer,ililarion" Indonesian Perspectives on APEC and Re'
Biotal coopemtion in Asia Pacific, p.62-68. Centre for Strategic and International Studies,
Jakarta.
Panagariya. Arvind. 1999, Regionalistn in Trade Policy
-
Essals on Preferential Trading, SinS Pote:
world Scientific.
Pangestu, Mari. 1994. "Regional Economic Coopeotion As a$ Inslrument for Economic Development:
An Asian PeNpective". Indonesian Perspeaives on APEC and Regiornl Cooperation in
Asia Pacific, p.205-23. Cenfie for Stmlegic and lntemational Studies, Jakarta.
Trude Poticy Review,December 1998, World Trade Organization, Switzerland.
smith, Anthony. 1999. "lndonesia's Role in ASEANi The End of lradership?". cont€mporary Soulbeast Asia, v.21, n.2, August, P. 238-60.
'ASEAN Trade Liberaliz.tion in the Regional and Clobal Context". Indonesian
Percpectives on APEC anl Regional Cooperation in Asia PaciJic, p. 224-59 Centrc for
Soesastro, Hadi. | 994.
strategic and lntemational Studies, Jakarta.
srdtr
7imer, october 4, 2000
Toh Mun Heng and Linda Low. 1993. "Is the ASEAN Free Tmde Area a Second Besl oPtion?" Ariax
Economic Jounal,,t.7,n.3, p, 275-98.
Websiles
ASEAN Secrctariafs Website at < gggtgtealscc.grg >
Horvard's Website at <
gggci@
lndonesian Central Burcau ofstatistics' Website
>
at < !fgy,!ps,ip,id >
I
'?
Indonesian central Bur€au of Statistics' website at <
rgrlbplJgid
>
Feridhanusetyawan employs global computable general equilibrium model to estimate th€ impact of
intemational trade liberalization on changc in welfarE, outputs by s€ctor, a||d employment in ASEAN
counries.
I It is explained by the report that lndonesia has reduced its applied MFN tariffs from unweighted
average of about 20% in 1994 to 9.5% in 1998. In 1998, Indonesia reduced tariffs on food items to
a maximum of5%.
SINREM I - Surabav. 29
Jmi 20U