Acfta Affect on Indonesia

China has been widely recognized as a super power nation in the future world economy. By playing multiple different roles, as consumers, suppliers, competitors, reformer (innovator) and provider of reliable human resources, China will reshape the world economy. China became a remarkable player by suppressing the production costs, improving technology and services, and has a strong and stable policy for advancing country.

In fact, China economic grows so strong and so fast, it urged economists such as Paul Samuelson to advise the world to rethink about free trade policy and comparative advantage.China also encouraged the emergence of anxiety and debate about America’s and other developed countries (G8) global competitiveness in the future. 1. 2Neoclassical Theory Traditional economic theory emphasizes on efficiency, allocation and utilization of scarce resources in the most efficient and growth optimum way to produce a more extensive range of uses for the products and services. This view is also called as classical economic theory or neo-classical and it is still prevalent in many countries.More and more countries believe that the economy will grow faster and stable if they meet the requirements such as: sufficient capital in the stock market; the sovereign right for consumers to choose the products and services they need (a business competition) that leads to the automatic price adjustment in the market; economic transactions decisions based on marginal analysis (the ratio of input and output, the ratio of profit and utility calculation), and a balance output (outcome) for every products and other economic resources in the markets to ensure stability.All these requirements indicate the existence of rationality in economic decision based entirely on materialistic, individualistic, and self-interest oriented point of view. In its development, there are times when there are many cases that show neoclassical economics can’t be applied independently.

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It needs support and intervention from other institutions (social and political) in order to continue to be an excellent economic development model.The interaction of economic and political practices affect the political-economic activity throughout the world in recent decades, including when capitalist economy countries (Free Enterprise Country) such as US and EU countries managed to triumph over centralized regime economic countries (Socialist-communist countries) such as China (pre-reform period), Cuba, and Laos. The collapse of capitalist competition, and the adoption of capital economic in socialist and ex-communist countries, put neoclassical economic theory back to the top.

China did not avoid the influence of neoclassical and political economy. China economy started to grow rapidly since the reign of Deng Xiaoping. Deng Xiaoping began to open the shackles that hold China economic development for decades in 1979.

China begin to held a red carpet events for foreign investors to bring in foreign capital into China in the form of Foreign Direct Investment (FDI). It is not a surprise that, until the late 1990s China is recorded as the largest FDI destination in Asia.Every encouragement and incentive from Chinese government brings a new wave of China fever by foreign companies.

This economic growth is supported by the emergence of a new manifestation of capitalist China, such as private companies, consumer prosperity growths, export factories, and stock market. 1. 3New Economic Model In the middle of the 1990s, China gradually confirms the existence of the new economy model. A large scale of capital mobilization and labor, foreign investment, large-scale industry, and government interference characterizes China economy model.China’s ability to mobilize capital and labor has increased the income per capita up to three times in one generation, and reduce more than 300 million people who live below poverty line.

China economic model also focus on the creation of a new technology and service, a good quality of goods and services with a low prices and industry manufacturing. Although it is not what they are known for, China has starts to innovate on new technologies, and I believe China will play an instrumental role in technology innovation in the future.China became very strong economically, especially due to its ability to complement its every sector of production. China will continue to dominate manufactured goods where low skill worker are needed and in the meantime produce a new technology in technological industry where high skill worker are needed. China plays an important role in each economy dimension, such as consumers, investors, producers, and the use of energy and commodities.

Chinese consumers and companies always strive for the latest technology and features.In the next decades, China will be able to control labor, industry, companies and markets in the world and replace American international dominance. 1.

4Limitation For warriors, limitation is not an obstacle, but is considered as a blessing. Maintain the spirit of life and to prosper a better and sustainable life condition is a subconscious energy that settles in almost every people in China, or people with Chinese ethnicity, which settles in foreign countries. With vast Geographical conditions, you would think that living in China would be comfortable.But with huge area of barren desert and mountains, it makes only a small portion of land in China are livable. Geographical difficulties, exacerbated by demographic profile, makes poverty a serious economic problems, which gradually absorbed as the standard norm for living in China where the main policy is take it or leave it.

Socialist-Communist as a political choice in China prevents Chinese people to cultivate personal wealth and instead of welfare, and the prevailing political system prevent Chinese people from freedom of speech. In the end of 1980’s, poverty can still be seen in every corner of big cities and rural areas in China.The fate of most of the overseas Chinese in various countries is not much different from the people in the land of their ancestors. The difference is, since colonial times, these nomads successfully build intimacy with the ruling party and it makes it easier for them to control and manage economic resources. This relation is also a key as to why Chinese people/ethnic in Indonesia are prohibited to enter the political, military and governmental institution in the New Order regime.

Deng Xiao Ping is aware of China’s economy collapsed is drawing closer, but still insisted on his intent to preserving communism in China.The result is a compromise between communism and capitalism, investment from foreign countries is accepted, but rejected the idea for political intervention in China. In Indonesia, democracy has become tradition, which can’t be removed. But we realize democracy will suffer a lot of obstacles when the economy condition is always in distress. The solution is to collect domestic investment, improving education quality, build access to global markets, choosing the right technology, and equitable distribution of development outcomes by provide financial incentives for small and medium size businesses.For Overseas Chinese people in South East Asia, even though the access to socio-political profession is prohibited (In Indonesia) or the local government implemented a policy of economic protection for indigenous population (in Malaysia), but they are free to enter the economy and entrepreneurship sector, which is not controlled by the “Pribumi” (a term coined to distinguish between native and foreign immigrants). 1.

5Relation (?? ,read : Guan Xi) One key to success in doing business for Chinese people who are living both in China or overseas was the strong existence of mutual trust at individual level and the existence of ?? act as a protector of the weak public institutions. In Chinese history, trust in paper money (cash) has undergone various tests related to fluctuating economic and political conditions. In connection to ?? , it is reasonable when only a few community members believe in bureaucracy and legal structure because the action of these two institutions do not imply trust and protection of individual rights and business transactions. As a result, formal institutions have never won the trust of society. In this context, ?? ot only provide space for the expression of inter-personal relationships that combined business with personal character (trait) and fidelity (loyalty), but also as a form of social exchange, based on primordial sentiments and emotions in a culture, characterized by a mutual trust. When a person is indebted to a fellow business people, the repayment will be more than the basic payment and all calculations (principal plus interest), it will also involve in a transaction of a social ties that are often beyond the normal economics transaction.There are always non-economic elements (intangible goals) such as political motivation, power, reach a certain status, and so forth in the transaction that involve Guangxi.

On the other hand, if someone reaches an achievement of the commitment that is built up in the spirit of Guangxi, it can easily spread a negative business image, because many people still look at?? as a form of corruption and nepotism. ?? Network materialized for a variety of backgrounds, some because they comes from the same family tree(?? , read : Qin Qi), a friend in the school (?? , read : Tong Xue), best friend in workplace (?? read : Tong Shi), or because there are common interests (?? , read : Tong Hao). But it is important to understand that?? is not identical with familial (familism) and paternalism. ?? focus more on the unwritten rules (unwritten codes) that protects the opportunistic behavior of its members. Following the changes in China’s economic policy, many Chinese immigrants who have been successful in foreign countries, because of ?? , returned with an investment to help built China economic in their ancestral lands.

Although smaller in scale, something similar also happened in Indonesia.A successful Indonesia entrepreneurs doing business in America, Europe and other parts of Asia sometimes return to his country, to build a business to support its core business abroad, by employing local workers. As a result, China positioned itself in the global market, with its good quality product and competitive price, with Indonesia soon to follow. 1. 6Consumer Roles Chinese society makes various changes to improve the economy state.

So it is with Indonesia. The life of the female population in China began to change rapidly, especially for younger women.Nowadays, this younger generation of female population can decide for themselves what they wanted to do with their life. For this generation, the changing views of women in the work place is a big thing, it’s a revolution. For entrepreneurs in China and Indonesia, this change represents an opportunity for exploitation.

With a population of 1. 3 billion people and counting, and 23% of whom are living below the poverty line, China needs goods and services that are cheap but also good in quality (long lasting product). Most foreign products are too expensive for the Chinese local market.The technicians and professionals in China need to focus on finding solutions to these problems in various fields ranging from manufacturing, healthcare, finance and education, to produce a good quality products that can be obtained by a poor China society. One solution to this problem is by producing primary goods in a large scale and with efficiency. 1. 7Business Innovation and technology Chinese community realize the benefits of low costs will end up probably within in the next fifteen years, and competition from India, Indonesia, Vietnam, Brazil and Ukraine will be very strict.For that reason, the need for technological innovation is crucial for survival.

Even without a new genius and innovative discovery in decades, Chinese technicians are able to clone even the world’s most advanced technology in telecommunication and computer service. Most entrepreneurs have realized China achievement in manufacturing. In addition to electronic gadgets and consumer electronics components, the influence of China in major global technology can be felt in technology competition, especially network and satellite equipment.China trying to match the technology in advances country, such as US and Japan, in order to avoid dependency on these developed countries, and also provides a cheaper technology product for the other country. For years, China has provided cheap prices on various goods such as shoes, clothing, and microwave ovens.

Currently, China is developing its domestic technology-intensive industries, such as in automotive, steel, chemical, semiconductor, and digital electronics industries.The result is China is currently playing catch up with technological advance countries in mechanical engineering technology and manufacturing fields. And China is trying to become the leader in the innovation field and is very likely to become a major center of innovation in the near future. Indonesia is also currently trying to develop innovations in technology. One of them is the water treatment plans development conducted by new entrepreneurs who have a partnership with global software and Telecommunication Company in Indonesia.

Until late 2009, Indonesia has roduce hundreds of industrial machinery and software technicians. With the need for installation of new innovation in businesses, we can expect the expertise of Indonesian society will develop more rapidly. 1. 8Corruption China is trying really hard to eliminate the widespread and rampant corruption in government institutions and political parties.

Air and water pollution that goes along with industrialization threaten the ecological environment and the health of Chinese residents. In China there is no legal assertiveness on environmental protection and copyright.Policy-making process is not clear. The court process for violations of rules, embezzlement and theft of intellectual property is a very long extremely difficult process. While Indonesia tries to adopt western legal system, but the development of these changes is very slow and long-term investment pause by the corruption in governmental body, unstable political power and unexpected policy changes. 1. 9 Copyright Infringement China population size creates a major new market to the world economy for every products and items ranging from cars to mobile phones.

China is one of the riskiest and most complex markets in the world. Intellectual property rights are often ignored and many agreements are unilaterally canceled. The failure of agreeing to new environmental regulations continues. Ever increasing output growth capacity and fierce competition from other Chinese local business means keeping prices low as their priority (marginal profit). The changes in rules and regulation makes Chinese companies needs to make adjustments constantly in order to continue to survive. Currently, in order to succeed in doing a business in China, it takes more than?? and keeping a low price, it also need to innovate and keeping the talented managerial employees and give them control to run company’s main activity.

Success also requires a complete understanding of complex Chinese market with a variety of market segmentation. Chapter 2. Indonesia Indonesia is the world’s 4th most populous country in the world, with over 238 million people; Indonesian market is a very profitable market. Indonesia is the founding member of ASEAN and also one of the members in G-20. Currently, Indonesia economy is 18th largest by nominal GDP and 15th largest by PPP (purchasing power parity).The estimation of Indonesia GDP in 2010 is $1.

029 Trillion and their GDP per capita is $4,394. 2. 1Indonesia Overall Economic Condition Indonesia has a lot in common if we compare with China. Both countries have a huge number of populations, a similarity in geography and demographics condition and a strong oriental norm and value that affect day-to-day business and economic transaction. The question is, with relatively close starting point (in 1980’s Indonesia’s GDP per capita is larger than China) why China economic growth performance is much better than Indonesia?If we use Porter Theory of “The Competitive Advantage of Nations” then the answer in simple, it lies in the lack of bureaucracy and administration regime. Although this answer is not one hundred percent correct, but if Indonesian bureaucrats are tolerant to critics, try not to be too defensive and try to introspect and then changes some policy and simultaneously implement a continuous and consistent political environment with budgetary support as done by Mr. Deng Xiaoping, the prospects for Indonesia to catch up to China are very large.

Indonesia may choose to make complementary products for Chinese products, for this to happen it will need a synergy efforts and diplomatic lobby between the two countries. Or Indonesia can choose to produce products that hold a comparative advantage to China product, such as household crafts and woods flooring. 2. 2 Optimistic Future The global economic crisis, which has been predicted by some observers a year or two earlier, reaching its peak in late 2008 and early 2009. The economic deterioration only rocked the stock market and world financial markets at first. Numerous financial investment companies collapse and eclare bankruptcy. However, because of the economic architecture, where every sector interact closely with each other, the crisis could not help but also spread to the real sector in the economy (Cover Gross domestic and national total production, consumption, savings and capital formation). Several major auto-industry slumped through 2008-2009, including Ford and GM.

The world economy experienced a sharp contraction and is at its lowest in decades. As one of the survivor of Asian Financial Crisis in 1997, Indonesia knows exactly what kind of consequences a crisis would bring.In the last quarter of 2008, Indonesian domestic economic growth plummeted. Rupiah (Indonesia monetary currency) value drops from Rp. 9,200,- per US dollars to more than Rp 12,000, – per US dollar. Jakarta Stock market index falls below 2000. The growth of the automotive industry also decreased sharply. However, according to an Economic Observer, Mr.

Tjiptono Darmadji, global economic crisis doesn’t really affect Indonesian economy. In the midst of a global economic crisis experienced by many countries in the world, Indonesia is categorized as a country with a quite optimistic economic growth outlook. Our economy in the fourth quarter of 2008 was bad and experience a contractions, but in the early 2009, signs of recovery have started to look up” he said on Thursday, September 3, 2009, in his office, Mid Plaza, Fl.

8 – Sudirman, Jakarta. Indonesian governments and central banks, so far, have been widely considered to be quite successful in taking anticipatory steps compared to other countries. Indonesian monetary, fiscal, and exchange rate policy that minimize the impact of world economic turmoil reflect this.

Even the IMF gave a compliment to Indonesian government for addressing the issues of the global financial crisis in a timely way.Indonesia’s economic performance during the first quarter of 2009 records an impressive 4. 4% growth rate in gross domestic product (GDP). 3.

ACFTA ACFTA officially came into effect on January 1st 2011 with the main principle of free trade. Free Trade is defined as the absence of artificial barriers, including government imposed barriers to trade among private individuals and companies located in different countries. AFCTA fully applied to ten members of ASEAN plus China. A lot of pros and cons regarding the implementation and effect of ACFTA have been discussed over the years.Some people consider ACFTA as a challenge for Indonesia economy to move forward, but others consider it as a huge blow to the emerging market. For the supporters of ACFTA, this agreement will bring a huge advantage for geostrategic and economic interests of Indonesia and Southeast Asia as a whole. But for those who oppose to it, the application of ACFTA is feared to destroy the national industry.

Because the final tariff goods from China to ASEAN, especially Indonesia is zero percent. The no tariff barriers will surely threaten the domestic industry due to the very competitive price of Chinese products.ACFTA implementation will indeed produce a big consequence.

Without a systematic and coherent policy, the implementation of ACFTA in 2010 will only backfire for Indonesia economy. 3. 1ACFTA Timeline. In reality, the agreement to implement the ASEAN-China Free Trade Area or ACFTA has been designed a long time ago and signed on November 4th, 2002. While “Common Effective Preferential Tariff” agreement had previously been designed and agreed on and applied into the framework of the ASEAN Free Trade Agreement (CEPT-AFTA), and the agreement was signed 18 years ago, precisely on January 28th, 1992.As stated above that the ACFTA became effective on January 1, 2010.

After the enactment of ACFTA, some groups of people, especially those among Indonesian businessmen requesting its enforcement to be delayed until Indonesian domestic entrepreneurs and companies are really ready to face the invasion of Chinese goods into the market. These Groups requested the postponement of the implementation of ACFTA because they’re worried it will cause waves of employment termination in a number of companies due to lack of product competitiveness in the market.In the case of large employment layoffs, the unemployment rate will rose, and the impact of the huge layoffs is that the poverty level also grow accordingly. Some experts predict Indonesian domestic product will be affected significantly because of ACFTA, including textiles and textile products, food and beverage, petrochemical, tools and agricultural products, electronics, industrial automotive components manufacturers and others. In connection with the objection from businessmen, Indonesian government has done an in-depth study and analysis to identify which sectors are expected to experience weakening competitiveness.

The review has identified as many as 228 products within the framework of ACFTA and as many as 227 products within the framework of the CEPT-AFTA tariff reductions will be postponed. Other efforts has also been made by Indonesian government, for example on 31 December 2009 Indonesia Ministry of Commerce has submitted a notification to the Secretary General of ASEAN regarding the domestic industry concerns over the implementation of the CEPT-AFTA and ACFTA, and requested the implementation of agreements to be revisited.In addition, Indonesian Government has also form a Coordination Team to be in charge of overcoming trade industry barriers in order to strengthen the competitiveness of national industries products in the face of global trade. The steps that have been taken by the team including: 1. Improving the effectiveness of the security in the country to prevent smuggling and supervise domestic goods circulation through improved application of a number of instruments in accordance with the regulation of international agreements, such as improving quality standards, intellectual property rights and consumer protection, dumping prevention and others. .

Improving and supervising the effectiveness of the issuance and use of certificate of origin documents for export and import purposes. 3. Strengthening export markets, by developing a Trade Promotion Center. 4.

Promoting the “Love Indonesian product” movement. 5. Handling other domestic issues, such as improving landscape, infrastructure and energy services, expanding access to financing, improved public services, and others. Indonesia government also promises that they will take several measures required to smoothen the renegotiation process of ACFTA with relevant parties.

3. Indonesia and Chinese products Known for its cheap price and medium to low quality, Chinese products penetrated every corner and every market in the world, everywhere you go you will find a “made in china” product. Rapid and stable economic growth also made China one of the most important economic superpower in Asia and the rest of the world. Low interest rates and the easy procedure in taking out loans led to the birth of huge amount of products that penetrated other countries with its relatively cheap price.

Great infrastructure is also highly considered to be Chinese advantage in the expansion of trade.In addition, the simple procedure for applying a new business ventures and getting a business license also play an important part. Such conveniences cannot be found in Indonesia. This is the reason why Indonesian domestic market is so concerned over the impact of ACFTA in the country. Application of ACFTA will certainly cause some changes in the map of trade between Indonesia, ASEAN countries and China. In table 1 below we can see Indonesia export-import volume with other countries: Table 1. M(million) US$ Country| Export| Import| | Jan 2009| Dec 2009| Jan 2010| Jan 2009| Dec 2009| Jan 2010| China| 462. | 1206.

8| 1011. 7| 1035. 7| 1482.

6| 1408. 0| Singapore| 580. 7| 713. 8| 701.

5| 651. 5| 784. 9| 784. 2| Malaysia| 281. 7| 730.

3| 600. 4| 212. 6| 298. 2| 330. 8| Thailand| 147.

9| 274. 3| 288. 6| 291. 1| 466. 6| 482. 7| Other ASEAN members| 252.

5| 436. 2| 367. 2| 51. 7| 136. 0| 102. 6| Total| 7280. 1| 13348.

1| 11574. 7| 6600. 6| 10299.

9| 9543. 3| Source: Indonesia Central Statistic Agency From the data in table 1, it is clear that China imports to Indonesia are larger than exports, resulting in trade deficit. So, the concern is very reasonable.Even without ACFTA, Chinese imports into Indonesia has recorded a high volume of trade, with the abolition of import tariffs Chinese goods to Indonesia, the number will just grow higher, resulting in a bigger trade deficit. Indonesia is overall condition is still far behind China. These deficiencies can be seen from the comparison of China and Indonesia macroeconomic indicators, as illustrated in table 2.

Table2. 2009. Indicator| Indonesia| China| Unit| Population| 240. 3| 1340. 0| Million people| Population growth| 1.

14| 0. 66| %| GDP per capita| 4000| 6500| US$| Unemployment rate| 7. | 84. 3| %| Inflation| 5. 0| -0. 8| %| Commercial banks lending rates| 13. 60| 5. 31| %| Industrial production growth| 2.

0| 8. 1| %| Road construction| 391009| 3600000| Km| High Way construction| 772| 53913| Km| Electrical production| 134. 4| 3451. 0| Million kWh| Electrical consumption| 119. 3| 3438. 0| Million kWh| Source: Indonesia Central Statistic Agency The indicators above explain how Chinese product is far more superior compared to those of Indonesia. Commercial bank lending rates in China only amounted to 5. 31 percent, while in Indonesia it stands much higher at 13.

6 percent.This is what causes the lack of growth in industrial production development in Indonesia. In 2009, Indonesia record only 2 percent of Industrial production growth while China reached 8. 1 percent. From these data, Indonesia’s infrastructure also left far behind. Good infrastructure will help creating a cheaper production costs plan, which in turn will push prices down.

Good infrastructure is also very important for market expansion to achieve import-export scale trade. 3. 3ACFTA impact on Indonesia Every single policy, even the best one, is going to have both positive and negative effect.ACFTA is no different. The impact of this agreement has broad implications in the fields of economy, industry and trade. From consumer or society point of view, this agreement provides a breath of fresh air because it makes the market flooded with a huge range of new and cheaper products.

Therefore, it will increase people’s purchasing power and the liquidity in the market will improve. However, this agreement makes the local industry feels uneasy, because the local industry is not quite ready for the invasion of cheaper Chinese products.The production costs of most Indonesian local products are still relatively high, even with the higher price (compared to Chinese products), Indonesian company still recorded a marginal profit. The problem that concerned Indonesian government the most is the effect of ACFTA to the sustainability of Small and Medium Enterprises in Indonesia.

The demand of small and medium scale enterprises products in Indonesia mainly come from the domestic market. This small and medium enterprise is the one who are worst affected by the invasion of Chinese products.The domination of Chinese products in Indonesia markets can be seen, as follows: Source : Litbang Kompas, Kompas,3 Februari 2010. Based on the chart above, we can see China’s product, especially electronics, toys and household equipment is very popular in Indonesia market. This is a serious challenge for SMEs that produce such goods, to continue his efforts. ACFTA impact also infiltrate into the agricultural sector, given the good agricultural import-export relations between Indonesia and the rest of ASEAN countries and China.

Data has shown Indonesia perform well in January 2010, gaining 2. billion US$ surplus in trade balance with ASEAN members and China. Largest surplus value comes from the plantation sector, mainly palm oil and its byproducts. Other plantation products such as: rubber, vegetables oil and saturated fat, rubber sheets, copra oil and cocoa brought in U. S. $ 2,756 billion. 0.

3. 4Indonesia-ACFTA policies Various policies had to be made so that the impact of ACFTA doesn’t undermine Indonesian economy. The most crucial thing to do is in suppressing the price of local products that can compete with cheap products from China.This is why Indonesian government needs to create a low production cost plan for small and medium size business. Readjusting interest rates of ordinary business and agricultural loans for commercial purposes can create a low production costs for domestic industries.

Indonesia basic loan interest rate is around 10-13 percent. This level of interest rate is considered to be high and it is a problem for businesses, particularly small and medium enterprises. Relatively high interest will make companies and individuals reluctant to borrow money/credit from the bank to invest further in their business because the cost and risk is very high.Business that needed high-interest loan like those in manufacturing sector will not be able to compete in the ongoing price war with Chinese products. Interest loans would put more burdens on the cost of capital thus raising production costs. When the production costs is higher, local businessman will have to raise the price of their products and it reduces the competitiveness of the products.

Therefore reducing lending rates is absolutely necessary to ease the burden of production costs and also encourage the opening of new business opportunity (new investment).Secondly, Indonesian government needs to improve the infrastructure in Indonesia. Infrastructure is a crucial variable in the spur the economy. A notable economist and Indonesia ex-minister of economics Mr. Kwiek Kian Gie said that in macroeconomic the availability of infrastructure services affect the marginal productivity of private capital, whereas in micro-economic context, the availability of infrastructure services affect the production cost reduction. A bad infrastructure can impair the performance of products and service distribution.

And it also increases the transportation cost which in turn will increase the production cost. This is why improvements in infrastructure departments will greatly reduce the cost of production. In addition to the two policies above, the agricultural sector needed to focus more in the development of commodity-based comparative and competitive advantages. Advantage in the plantation sector needs special attention from the government and business owners. Plantation products required an innovation and development in process production area.So export commodities are no longer stuck in the form of raw materials, but also a processed product, which will bring a much higher profit. It is expected that with a systematic and focused policies, ACFTA can help Indonesia economy to grow faster and raise the competitiveness of Indonesian local product to become better in quality, cheaper in price and more attractive in the eye of the international market.

4. Conclusion ACFTA is a global competition event in the field of production of goods or services that are held in accordance with the agreement of Indonesia and China in early January 2010.Indonesian government need to plan a competitive strategies to prevent Chinese product domination, if they can’t fulfill their obligation to protect Indonesian local businesses, the final outcome will make be devastating. The pessimism of Indonesian producers about whether they can compete with a very competitive competition from Chinese products is reasonable. ACFTA planning and timing is deemed to be too aggressive.

Although its purpose is to further promote free trade and hasten the economic liberalization in Indonesia, it seems some Indonesian producers are not quite ready to compete with Chinese products influx.Even though ACFTA produce both positive and negative impact to Indonesian economy, it can’t be denied that the negative impact ACFTA bring to the table is too big to risk. Indonesian Government should plan more anticipatory measures to give local industry a chance to grow by increasing the installed capacity in all branches of manufacturing industry, deregulating complicated process of licensing, improvements in electrical and transportation infrastructure, as well as easier access to credit and low interest rates.

They also need to give more incentive to small and medium enterprise for them to upgrade and improve their product competitiveness. ——————————————– [ 1 ]. http://onpoint. wbur. org/2004/09/27/paul-samuelson-rethinking-free-trade [ 2 ].

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html [ 4 ]. http://dayatransasia. com/? p=214 [ 5 ]. http://en. wikipedia. org/wiki/Indonesia [ 6 ].

http://www. nationmaster. com/graph/eco_gdp_percap-economy-gdp-per-capita&date=1980 [ 7 ].