Topic: The Influence of AFTA’s Agreement for Indonesian Economy

The Black and White of AFTA for Indonesian Economy

AFTA (ASEAN Free Trade Area) is an agreement among the countries of

ASEAN (Association of Southeast Asian Nations) to contribute in the increasing of their
economy sector. AFTA was first introduced at the 4th ASEAN Summit in Singapore,
1992. It will have been operating after fifteen years (2008). However, it has been
delayed and will be applied on 2015. The aim of AFTA is to make ASEAN major
producer, which means all their products will be able to compete with products from
other countries in the world. Indonesia, as one of ASEAN members, will also take part in
this agreement. Surely there are many advantages but there are so much challenges
that we can’t avoid. We should understand all the positive and negative impacts of
AFTA to get the most benefit of it.

AFTA basically offers benefit to Indonesian economy. Firstly, many producers will
decrease their production cost because import tariff will be away for 0-5%, so will the
restriction quantity and the other non tariff pursuer. They don’t have to pay as much
fees as they used to because of this system. As we know, although Indonesia produce
many commodities, it still need some of them from other countries. For example,
Indonesian soybean productions are 800.000 ton/year while Indonesian needs 2,3-2,5
million ton/year. Thus, Indonesian government must import from Ukraine (1,5 million
ton), Malaysia (1,1 million ton), U.S (146.000 ton), and Ethiopia (694 ton). However, the
prices of soybean now at about Rp. 8.500/kg until Rp. 9.500/kg. it is more expensive
than some months ago when soybean still reached Rp. 6.500/kg until Rp. 7.000/kg. It is
a big problem for many producers especially tempe sellers in Indonesia because it will
decrease their profit. Therefore, by AFTA, they expect it will give more profit for them
because the prices of import products can be pressed especiallyfrom Malaysia and
other ASEAN countries.

Then AFTA will profitable for business entrepreneurs. They have more
opportunity to market their products overseas. Moreover, they can export their
manufactures easier because AFTA make the ASEAN countries can’t refused the
products like they did before, such as furniture products. Indonesian furniture products
has been exported to China and it become the most popular than the local furniture
products. China’s people like to buy Indonesian products because it has own speciality
such as its design, quality, softness, and its aesthetic sense. However, in the ASEAN
market it can’t dominate enough because some countries in ASEAN confine it in order
to keep their local products. By ATA, it can be minimized.
 Beside business entrepreneurs, AFTA profitable for consumers too. They have
so much choices in many available products the local market. Many kind of
commodities are provided with varied price and quality. One of the examples is sugar.
Sugar is a major need for most of Indonesian people. Now, the price is approximately
Rp. 10.000/kg. of course, it will blow the consumers, so by the realization of AFTA, the
consumers can choose the level of quality and the price of a product.

On the other hand, AFTA is not always positive all the time. There are also some
bad effects in the economy sector. Initially, this agreement is to make possible for all
local products to be sold freely in ASEAN market. At the same time, foreign products
can be sold in the local market too. However, there are many kind of local products that
can not dominate yet even in local market. There are some possible reasons, such as it
has bad quality or the prices are more expensive than foreign products. Sometimes,
supplies of local products are also not enough for local demand that the government
must import the commodities (rice, meat, sugar, soybean,etc.) from the other county. All
of them have correlation each other. The reasons why local products have higher price
because firstthe expense to produce is higher or second it really has better quality.
When the material must be imported, it will make the prices of local products expensive
because the production expenses are higher. Thus, the the local products can’t
compete with foreign products in price. However, sometimes we still need to import
though it will make the products more expensive because we really need it, for example
soybean for tempe. To solve this problem, the government then must import material
supplies. However, it can’t make the prices of local product cheaper. So that, some of
the producers will use a lower quality materials to produce their products. If this situation
happen all the time, it will affect the economy of Indonesia because the local products
can’t be competitive in quality.

Moreover, most of Indonesian people like to consume foreign products. They

think that local products are not good enough. In fact, there are many kind o Indonesian
superior local products hve export quality such as textile, furniture and rattan products,
rubber, Crude Palm Oil (CPO), coffee, cacao, etc. there are also some agricultural
products with better quality than the imported products like dragon fruit, apple, orange,
other fruits and vegetable commodities.

Third, AFTA give more chance for the exchange of human resources. Indonesia
needs capable and qualified employees in order to win competition among the ASEAN
countries. The question is, can Indonesian employees win the competition? According
to Global Competitive Index (GCI) 2013-2014 from World Economic Forum, Indonesia is
the 5th rank in ASEAN (38th rank in the world). It s lower than Singapore (1st rank in
ASEAN and 2nd rank in the world) and Malaysia (2nd rank in ASEAN and 24th rank in the
world). In the third rank in ASEAN there is Brunei Darussalam with 26th rank in the
world. Then Thailand is in 4th rank in ASEAN and 37th rank in the world. Indonesia is just
higher than Philiphine (56th rank in the world), Vietnam (70th rank in the world), Laos
(81th rank in the world), Cambodia (88th rank in the world), and Myanmar (139 rank in
the world). It is critical fact because there are man factories in Indonesia employ foreign
people because they think that Indonesian employees are not qualified (seeing the
rank). Indonesian only become blue colar employees in overseas such as housemaid,
baby sitter, factory labour, etc. it is because many Indonesian employees dosen’t have
higher education. However, there are some factors that meke Indonesian employees
are needed in overseas. For example, Hongkong employers will choose Indonesian
housemaids because they are more loyal, honest, diligent, and obidient. We just need
to add more extra values to the qulity of our employees.

Indeed, ready or not, Indonesia will face the realization of AFTA because they
have signed the agreement. To minimize the negative impacts of AFTA, Indonesia must
prepare its strategical programmes, not just its government but its people can contribute
too. First, the Indonesian government must increase quality of their human resources
and employees by education and training. They also can give sertfications for
employees so that the employers can know and compare their quality. Second, the
producers and business entrepreneurs must increase the quality of their products by do
some innovations in order to compete with others, especially foreign products. At least,
the consumers can take part in saving the economy of Indonesia by loves the local
products because Indonesia is a potential market for foreign producers. If Indonesian
like to buy the local products, it can empower the Indonesian economy. Finally, sve the
Indonesian economy is ourbduty as Indonesian people.

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