Towards AEC
    Category: Issues & Ideas By : Siti Aisyah Rachmawati Read : 1931 Date : Friday, November 14, 2014 - 11:14:40

    Ahmad Zamroni / Forbes Indonesia

    The world is globalizing, and ASEAN doesn’t want to be left behind. In 2007, the AEC (ASEAN Economic Community) blueprint was launched and is scheduled to be implemented by the end of 2015. The AEC aims to transform ASEAN into a region with a free movement of goods, services, investment and skilled labor across the region. It also promises a freer flow of capital while pushing for more equitable development across ASEAN.

    In August, consultancy EY Indonesia invited four experts to discuss the onset of the AEC next year in an exclusive event AEC 2015 and beyond: Opportunities and challenges for foreign and local investors. The first expert, Simon Tay, chairman of the Singapore Institute of International Affairs, says that in recent years ASEAN has gotten more target oriented, allowing its goals to be better executed. However, he feels the individual countries in ASEAN still have much homework in order to meet the AEC deadlines.

    David Rimbo, transaction advisory services managing partner of EY Indonesia, agreed with Simon’s view, adding that the Indonesian government needed to do more to explain and prepare the business and political community for the onset of AEC 2015. At the same time, many foreign companies have eyed Indonesia for its population and economic size according to Koichi Aiboshi, the Ambassador of Japan to ASEAN. “Indonesia’s size is equal to Myanmar, Thailand and Vietnam combined,” he says.

    Considering the size and consumption-driven nature of Indonesian economy, opening up the market would mean that Indonesia is exposing itself to a major influx from other ASEAN countries. Yet many Indonesian businesses are still preoccupied with just the Indonesian market, and don’t have much of a regional outlook. Thus local industries could be harmed by new competition without a well-managed regional plan, noted the experts.

    Another issue that needs to be addressed is reducing non-tariff barriers, one of the oldest and thorniest issues in opening up trade. ASEAN members use non-tariff barriers, such as industry and professional standards to protect their local industries, says Thomas Wirtz, transaction advisory services partner for EY Indonesia. “Reduction of non-tariff barriers in ASEAN would force economies to become more competitive and open up opportunities for expansion and growth outside local markets,“ he says. “In markets such as Indonesia, companies need to start rethinking their strategy and focus on scale and regional branding. Otherwise they will be eaten up by the competition once the market is open.” The race towards the deadline is on and Indonesia needs to close the preparedness gap. “Basically, the things that make Indonesia better are the same things that make Indonesia better connected to the ASEAN market and the global one,” says Simon.