The creation of Regional Trade Agreements (RTAs) and Free Trade Areas (FTAs) shows a significant increasing trend since 1990. This trend of RTAs/FTAs creation also occurs in East Asia region. In fact, East Asia region have intensively constructed economic regionalization more than other region in the world. This study aims at analysing opportunity and challenge for Indonesia from the implementation of Regional Free Trade Area in East Asia, in particular ASEAN+3 Free Trade Area. The analysis includes economic (trade/industry and investment) as well as political considerations. A number of general findings from this research are as follow. In trade/industry area, on average every country under consideration experienced a double digits export growth. Furthermore, this study found increased importance of East Asia region as trade destination of ASEAN+3 countries. In investment area, investment in Asia has given a significant contribution toward industrialization process in the region. Investment from East Asia countries has replaced the role that was done by United States in 1960s to 1970s, which was followed by Japan in 1980s. With regard to political aspect, recent political relationship between ASEAN countries and East Asian countries shows a significant improvement, which positively further contributed to the creation of ASEAN+3 economic cooperation. This study also reveals a number opportunities and challenges for Indonesia resulting from recent economical and political dynamics in East Asia Region. With respect to trade and industry, this study argues that there is some opportunity exists from Indonesia’s exports commodities: beverages and tobacco; animal, vegetable oil / fat / wax; and food and live animals. The challenge is coming from the fact that these potential products are also potential products in almost all other countries. Hence, strengthening the competitiveness of this industry in Indonesia could provide further benefits for the export performance of these products. Another challenge might be of tough process in negotiating the elimination of trade barriers of these products in the ASEAN +3 FTA forum. In politics, we identified that Indonesia has several opportunities to strengthen its influence on relationship with three main East Asia countries. The three East Asia countries have a big interest to Indonesia, which mainly caused by three factors: market, labor and natural resources. This condition should become Indonesia bargaining power in establishing relationship with other countries.
Discussant: Prof. Nen Amran
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