6 - Deadline 2015: Assessing Indonesia's Progress towards the AEC

Summary

On 1 January 2010, ASEAN entered yet another important phase in its advance towards the implementation of the ASEAN Economic Community (AEC) in 2015. On that day, the ASEAN Six members, including Indonesia, was to eliminate all tariffs under the inclusion list (AEC), except for those phased in from the sensitive list and highly sensitive list (SL), some of which, according to the schedule, may be eliminated at a later date. Similarly, they should remove all quantitative restrictions and non-tariff barriers on goods in the SL. In Indonesia, this event has gone by almost unnoticed.

This chapter attempts to assess Indonesia's compliance with AEC liberalization schedules. In particular it tries to answer whether Indonesia is well positioned to fulfil all its commitments by 2015. The difficulty that arises in trying to address this issue stems from insufficient information to carry out the assessment. But it is also because the evolution of the AEC is by its nature a dynamic process. One cannot simply do a linear extrapolation of the progress to date into the future. There are other unforeseen, endogenous as well as exogenous, factors that may influence the future implementation of the blueprint.

With regard to trade liberalization, Indonesia's performance to date is at best mixed. On the one hand, in the goods trade sector, Indonesia has done relatively well. As a result of more than two decades of liberalization programmes, the country's average MFN (most favoured nation) tariff is now fairly low. Similarly, Indonesia has removed most of the non-tariff barriers and quantitative restrictions that were once widespread. In the services sector, on the other hand, Indonesia's performance is rather poor. Unlike the goods sector, the liberalization of the services sector has proceeded only slowly. In this respect, it seems that Indonesia's commitments to the General Agreement on Trade in Services (GATS) and the ASEAN Framework Agreement on Services (AFAS) do not provide enough incentive for further liberalization in the services sector.