as an economic actor Indonesia certainly cannot stand on its own. Like any other economic actor, Indonesia has to interact with other countries, especially neighboring countries. to make the country’s economy more developed
One form of economic cooperation among Southeast Asian neighbors is the establishment of the Association of Southeast Asian Nations (ASEAN) or Association of Southeast Asian Nations in 1967 in Bangkok, Thailand. Southeast Asian regional organizations have established a large project called ASEAN Economic Community (AEC) Or if it’s Indonesian language, it’s called the ASEAN Economic Community (AEC).
What is AEC and what does it mean for Indonesia? Check out the full description below:
Meaning of MEA (ASEAN Economic Community)
MEA (ASEAN Economic Community) is the main project of ASEAN member countries consisting of Indonesia, Singapore, Malaysia, Vietnam, Philippines, Brunei Darussalam, Cambodia, Laos, Myanmar and Thailand.
After the establishment of ASEAN itself, MEA’s history can be traced back to 1992. At that time, the leaders of Southeast Asian countries planned to create the ASEAN Free Trade Area (AFTA) or free trade area. in Southeast Asia. Then, in 2003, there were plans to establish an economic integration of Southeast Asia with the signing of the ASEAN Concord II Declaration in 2003. Initially, the AEC had Planned to be established in 2020 but then accelerated to 2015.
Before understanding the purpose of setting up MEA, I think you need to know the challenges that you face in international trade. Basically, the establishment of the AEC is to make it easier for member countries to solve this problem.
In theory, international trade is necessary because each country has a competitive advantage (competitive advantage) compared to other countries, for example, Indonesia excels in the number of workers (abundance of labor), but capital resources are relatively small. Of course, this is the opposite of Singapore. which is a city-state rich in capital but with limited labor
Unfortunately, trade between these countries is hampered by challenges such as currency differences. Differences in applicable laws import and export duties (customs) and so on. With the AEC or MEA, it is hoped that these challenges will be alleviated so that the exchange of resources among Southeast Asian countries can run more smoothly.
Objectives of the MEA
What is the purpose of this ASEAN cooperation?
1. Create a single market and production base
With a population of over 600 million, Southeast Asia is certainly a potential consumer and producer base. Especially with its geographic location between two continents. with free flowing capital and labor resources It is hoped that the single market and production base in these countries will be able to attract investors both from outside the region and from within the ASEAN region itself.
2. Building a competitive regional economy
As Asia’s third largest economic power region, It is hoped that when the AEC is established, the member countries of the AEC will become countries with high economic competitiveness.
3. Make economic development in ASEAN countries more equal.
As mentioned above, the MEA has 10 member countries. Most of the member countries are developing countries, with only 2 of the 10 member countries being developed countries, namely Brunei Darussalam and Singapore. with the establishment of the ASEAN Economic Community We hope that economic development in these countries will be more equitable. due to the free flow of capital and labor resources
4. Making the ASEAN economy integrated
The ultimate goal of the establishment of the AEC is to build an integrated ASEAN economy. Simply put, goods can be imported or moved in and out of neighboring countries freely. especially if after the AEC plans to do ASEAN single currency (single currency) works. You don’t need to exchange rupiah for ringgit when you go to malaysia.
Impact of AEC for Indonesia
- Export-import is much smoother.For export-oriented entrepreneurs in Indonesia, the MEA’s presence makes it easier for them to sell their products to neighboring countries. As for entrepreneurs who want to import products as raw materials for production or distribution to MEA, it also facilitates entrepreneurs to buy products from abroad more easily.
- Increase investment from neighboring countries to Indonesia.. Foreign investment, especially from neighboring countries, has a positive effect on the country’s economic development. As it is not uncommon for foreign investment in Indonesia to be used to build factories or infrastructure that empowers local workers. As a result, the rate of labor absorption is higher. So far, Singapore and Malaysia are the two countries that have invested heavily in Indonesia.
- knowledge transferIt is hoped that in addition to investing in the form of capital, the MEA will also result in investments in the form of human resources. For example, a team of experts from Singapore or Malaysia works in Indonesia. Their care will gain more knowledge.
- a more stable economy. Did you know that the 1998 financial crisis was a crisis transmitted from Thailand? Not only Thailand and Indonesia Malaysia was also affected. This crisis shows that the economies of Southeast Asia are inherently interconnected. with clearer economic cooperation or even economic integration I hope that the same kind of crisis will not happen again.
- labor competition. Despite being the most populous country in Southeast Asia. But it is undeniable that the existence of the AEC will increase labor competition between Indonesians and residents of other ASEAN countries, such as between Indonesian and Filipino migrant workers. Due to being a former colony of the United States, TKIs in this island nation are more proficient in English than TKIs from Indonesia.
- competition with foreign products. Imported goods are not just raw goods that can be reprocessed. But also the finished goods. These imported finished goods will be the main competitors of the same type of finished goods produced domestically. But imported goods are often seen as more noble than local ones.
- resource exploitation. As a country rich in natural and human resources Indonesia’s challenge during the AEC is to ensure that the country’s natural and human resources are not exploited while remaining competitive with other countries. because even in the end Entrepreneurs will have to look for more affordable production sources.
The main way you can manage MEAs is to improve your human resource (HR) quality by adding the skills and knowledge needed.