IPB University Professor of Economics Explains Indonesia’s Challenges in ASEAN Trade Cooperation

Indonesia as one of the countries in the Southeast Asian region or the Association of Southeast Asian Nations (ASEAN) still has many challenges, one of which is in terms of state trade, especially in agricultural commodities.

Permanent Professor at the Faculty of Economics and Management (FEM) IPB University, Prof Dedi Budiman Hakim explained that in facing these challenges, countries in Southeast Asia have trade cooperation within the framework of the ASEAN Free Trade Area (AFTA) and the ASEAN Economic Community (AEC).

“This is done through reducing and eliminating trade barriers as well as mobility of services and production factors, especially trained workers. AFTA and AEC are also opportunities for Indonesia to increase market access, especially for trade in agricultural products,” explained Prof Dedi in a press release delivered to the media on 7/18.

Prof Dedi said that the results of the impact analysis from AFTA showed that Indonesia did not experience a drastic or significant increase in imports. In fact, Indonesia is the country least affected by trade liberalization in the ASEAN region.

“The total value of Indonesia’s exports after AFTA showed an upward trend to each ASEAN country until 2011. However, from 2012 to 2020, the trend in the value of Indonesia’s exports tended to decrease. This should be a concern for Indonesia because it is an indication that AFTA has not yet been utilized. optimal,” he said.

He said, apart from the low share of agricultural trade in total trade, consumer or household preference factors have contributed to the not maximizing benefits of AFTA and MEA cooperation.

“Agricultural products exported by ASEAN countries are substitutes, not complements and are not responsive to increases in income or purchasing power (Bennet’s law) as well as reduced proportions of spending on food (Engel’s law),” he said.

According to the Economics Lecturer, ASEAN’s chances of forming trade and economic cooperation like the European Union are very small. This is due to the absence of a clause or obligation to provide compensation for losses due to trade liberalization.

“Apart from that, it is impossible to fulfill the prerequisites for a supranational body. Joint market economic cooperation requires broader economic integration and economic policy coordination, which ASEAN does not have,” said Prof Dedi. (Lp) (IAAS/HNJ)