ASEAN Economic Community The world that is changing from day to day is responded to by the countries in Southeast Asia who are members of ASEAN by strengthening relations between countries. Relationships that are formed are usually manifested in the form of cooperation in several fields. One area of focus is the economic field. Currently, several ASEAN countries have shown significant developments, even including their position that is taken into account in the international arena. Call it Indonesia, Thailand, Vietnam, Malaysia, and Singapore. These countries are now not just consumers, but also become producers for other countries. This is a positive value, of course. The existence of the European Union and the North American Free Trade Agreement encourage ASEAN countries to initiate cooperation in the wider trade sector. The ASEAN Economic Community (AEC) was conceived to form a single market and create competitive conditions between countries for the improvement of member countries. A. Background of the ASEAN Economic Community The history of the MEA begins with a mutual agreement at the Summit which was held in Kuala Lumpur, Malaysia, which produced a shared vision of Southeast Asian countries (ASEAN Vision 2020). The aim is to make the Southeast Asian region a prosperous region with equitable development and economic development in each of its member countries. The summit in Bali, Indonesia in October 2003 produced similar results to the 1997 summit. At the Bali Summit, the leaders of the ASEAN countries stated the importance of integrating the ASEAN Economic Community (AEC) as one of the main objectives in the integration of economic behavior in the regional region will be implemented in 2020. The next summit in 2006 in Kuala Lumpur, Malaysia gave birth to a new consensus. It states that the year of the entry into force of the MEA was advanced. Which initially in 2020 became 2015. The consensus gave birth to a declaration called the Cebu Declaration. With the signing of the Cebu Declaration, the consensus decision from year to year becomes a concrete step to make ASEAN a free trade area that includes all components of economic activity. Starting from goods, labor (skilled), investment, capital, to services.1 1 https://www.cermati.com/artikel/masyarakat-ekonomi-asean-mea-inilah-yang-perlu-diketahui, December 25, 2019 1|Page B. ASEAN Economic Community The Asean Economic Community (AEC) was officially adopted on December 31, 2015. The most influential country is the State of Vietnam. Vietnam has potential sectors similar to those of Indonesia. Vietnam has the same industrial products as Indonesia. They have textile products and shoe products. The Association of Southeast Asian Nations (ASEAN) is an organization for Southeast Asian countries which was founded on August 8, 1967 in the City of Bangkok. This agreement was approved by five founding figures who were representatives of five different countries in Southeast Asia. And these are the names of the five ASEAN founding countries and their founding figures: 1. Indonesia, at that time was represented by its foreign minister named Adam Malik 2. Malaysia, at that time was represented by its foreign minister named Tun Abdul Razak. 3. Thailand, at that time was represented by his foreign minister named Thanat Khoman. 4. Singapore, at that time was represented by his foreign minister named S. Rajaratnam. 5. The Philippines, at that time was represented by its foreign minister named Narciso Ramos. Then the number of ASEAN members increased to 10 countries. ASEAN countries include: Indonesia, Malaysia, Thailand, the Philippines, Singapore, Brunei Darussalam, Vietnam, Laos, Myanmar, Cambodia. With the opening of the MEA, automatically foreign securities companies can easily offer their products in Indonesia and encourage Indonesian companies to register their shares in other countries. In quality, fruits and vegetables from Indonesia are recognized by many countries as the best tropical plant products in the world. However, improvements have not been made, so that the competitiveness of Indonesian vegetable and fruit products has not yet been lifted.2 2 http://sukseskey.blogspot.com/2015/12/mea.html, December 27, 2019 2|Page The ASEAN Economic Community (AEC) is a form of regional economic integration that is planned to be achieved. It is known that the ASEAN Economic Community (AEC), has a goal as a single market and production base, so that the free flow of goods, services, investment, and skilled labor and capital flow can be more free with the presence of the AEC. The problems that have stemmed Indonesia so far as trade barriers, with the presence of the ASEAN Economic Community (AEC) can be a solution by reducing those obstacles. In fact, with the presence of the MEA (ASEAN Economic Community) trade barriers will no longer exist. If this can happen, it will benefit the Indonesian people. On another aspect, the presence of the AEC (ASEAN Economic Community) will provide new challenges for the nation and state of Indonesia. The challenges of the presence of the ASEAN Economic Community (AEC) in the form of the problem of homogeneity of commodities traded for example, agricultural commodities, textiles, wood products, rubber, and electronic goods. In some cases, Indonesia is said to be not ready to face the ASEAN Economic Community (AEC). These ideas and statements are not without cause, because the competitiveness of national and regional economies is not ready. Infrastructure limitations are also the most crucial obstacles Indonesia will face in the future. In general, what is meant by the ASEAN Economic Community (AEC) is an initiative of ASEAN countries to realize ASEAN as a solid economic region and taken into account in the international economic arena. In realizing the ASEAN Economic Community (AEC) there are 4 pillars that are an agreement for ASEAN leaders.3 The Four Pillars of the MEA are: 1. Single market and production base; 2. Highly competitive economic zones; 3. Regions with equitable and equitable economic development; and 4. Regions that are integrated with the global economy. The four pillars are contained in the Blueprint document agreed at the 38th ASEAN Economic Ministers Meeting (AEM) in Kuala Lumpur in August 2006. In 2015, ASEAN member countries approved the ASEAN Economic Community Blueprint 2025. The MEA Blueprint 2025 will be built on the 2015 MEA Blueprint consisting of five interrelated and mutually reinforcing characteristics, namely: (a) an integrated and integrated economy full; (b) ASEAN which is competitive, innovative and dynamic; (c) Increased connectivity and sectoral cooperation; (d) ASEAN which is resilient, inclusive, and oriented and community centered; and (e) global ASEAN. MEA 2015 aims to improve the welfare of ASEAN which has characteristics as a single market and production base, ASEAN region is more dynamic and competitive, has equal development, and accelerates economic integration in the ASEAN region and with regions outside ASEAN. 3 https://www.artikelsiana.com/2019/08/pengertian-mea-tujuan-latar-belakang-dampak-mea.html, December 25, 2019 3|Page To implement the 2015 MEA Blueprint, scorecards containing deliverables are determined, namely: 1. 611 action steps in the Full Scorecard category; and 2. 506 action steps in the Focused Base category. As of December 31, 2017, 72 out of 118 priorities (61%) of the AEC implementation in 2017 have been successfully implemented. Of the 46 priorities that have not been implemented, 12 of them have been implemented by several ASEAN member countries. So far Indonesia has implemented 85 of the 118 priorities. MEA 2025 is a continuation of the 2015 MEA, and aims to make the ASEAN economy more integrated and cohesive; competitive and dynamic; improved sectoral connectivity and cooperation; tough, inclusive, oriented and community centered; and global ASEAN. The scope of ASEAN economic cooperation: ASEAN economic cooperation covers the fields of industry, trade, investment, services and transportation, telecommunications, tourism, and finance. In addition, this cooperation covers the fields of agriculture and forestry, energy and minerals, as well as micro, small and medium enterprises (MSMEs). We can see the profile of the ASEAN economy as follows: 1. ASEAN countries are rich in natural resource commodities in the form of energy, minerals and food crops; 2. The large ASEAN population, which is 632 Million People (2015), the majority are of productive age; 3. The economic growth of ASEAN countries is relatively high, an average of 5% - 6% per year. To encourage equality of development between member countries (narrowing the development gap), ASEAN has the Initiative for ASEAN Integration (IAI) or the ASEAN Integration Initiative (IIA). IIA aims to create equitable development between ASEAN-6 (Brunei Darussalam, Indonesia, Malaysia, the Philippines, Singapore and Thailand) and the CLMV (Cambodia, Laos, Myanmar and Vietnam). Implementation of the Initiative for ASEAN Integration: The Initiative for ASEAN Integration is carried out in the form of capacity building training projects, institutional development assistance, policy advice, and feasibility studies. Project Funding Initiative for ASEAN Integration: Project implementation generally receives funding from ASEAN-6, dialogue partners, or international institutions in the framework of IIA and bilaterally. Initiative for ASEAN Integration Projects: Initially the Initiative for ASEAN Integration project was implemented in the fields of economics such as infrastructure development, human resources, capacity building for regional integration, energy, investment climate, tourism, poverty alleviation, and improving the quality of life. In its development, the IIA project expanded to cover the fields of politics-security and social culture. 4|Page In addition, at the suggestion of Indonesia, ASEAN has approved the ASEAN Framework on Equitable Economic Development (AFEED) or the ASEAN Framework on Equal Economic Development. The framework emphasizes efforts, among others, to reduce development gaps, strengthen the quality of human resources, increase social welfare, develop micro, small and medium enterprises (MSMEs), and broader participation in the ASEAN integration process.4 C. The Purpose of the ASEAN Economic Community (AEC) As explained earlier, the establishment of the AEC has the main objective of presenting economic equality for all citizens of the ASEAN region. If elaborated more deeply based on the Cebu Declaration, the main objectives of the establishment of the ASEAN Economic Community (AEC), namely: 1. Creating a single market that includes ASEAN countries as well as a production base with relation to the elements of free economic activity products, such as labor (educated / skilled), duty free for the flow of goods and services from the ASEAN region, and investment in and out and capital flows to countries in the region. 2. Making ASEAN a region with high economic competitiveness marked by strengthening regulations in economic competition, including consumer protection, Intellectual Property Rights (IPR), taxation, smooth eCommerce activities, and infrastructure development. 3. Spread the economic empowerment of the ASEAN region with the main target of revitalizing Small and Medium Enterprises (SMEs), especially for the countries of Cambodia, Myanmar, Laos, and Vietnam (CMLV). As is known with the CMLV country has long and repeatedly been plagued with a variety of political, social and cultural issues that affect the security of the country. Thus, as summarized in the ASEAN Vision 2020 and the ASEAN Concord II Pact, the AEC was created with the intention to evenly distribute the economy throughout the region. 4. Integrate the regional economy with the global economy with the basic aim of increasing ASEAN's participation in the global policy arena. All done with a coherent approach between the regional and global economies. This certainly is one of the positive sides because later input from ASEAN countries is considered important. The purpose of establishing AEC in accordance with the pact in the Cebu Declaration certainly provides a new style for the economic characteristics of the AEC region. These characteristics can be described as follows: a. The economic climate of the region has become more competitive. b. Efforts for economic equality within the scope of countries joined in ASEAN. 4 https://kemlu.go.id/portal/id/read/113/halaman_list_lainnya/masyarakat-ekonomi-asean-mea, December 25, 2019 5|Page c. Integration of the global economy and remote areas to become a production base and single market. Considering how big the goals and strictness of the global economic style of the AEC region is, certainly it is felt necessary for the Indonesian people to know more deeply the intricacies behind the AEC and its benefits.5 D. Issues discussed in the ASEAN Economic Pillars 1. ASEAN trade a) ASEAN Goods Trade i. ASEAN trade liberalization began since the formation of the ASEAN Free Trade Area (AFTA) in 1992. To facilitate smoother trade, the ASEAN Trade in Goods Agreement (ATIGA) was adopted in February 2009. ASEAN as a whole has eliminated 96.01% of tariff posts. ii. ASEAN goods trade negotiations carried out in the Coordinating Committee on ATIGA (CCA). The CCA discusses issues related to goods trading practices by each ASEAN member country and their compliance with ATIGA, such as the issue of tariff transposition, non-tariff measures (NTMs), and rules of origin (ROO). iii. AEC 2025 Trade Facilitation Strategic Action Plan (ATF-SAP) was adopted at the 31st AFTA Council Meeting in September 2017, with the aim of realizing the target of the AEM mandate of reducing the transaction costs by 10% by 2020, and doubling the amount of intra-ASEAN trade between 2017 and 2025. iv. To facilitate trade in the region, ASEAN has launched ASEAN Solutions for Investments, Services and Trade (ASSIST) which can be used directly by business actors to submit complaints about Non-Tariff Barriers (NTB) and other obstacles encountered when conducting business relations with Other AMS. v. ASEAN also has an ASEAN Trade Repository (ATR) which compiles the National Trade Repositories of each AMS. This ATR contains AMS policies and regulations related to trade in goods. ASEAN has also launched Tariff Finder which is an online mechanism to get information related to tariff preferences that are included in the ATIGA and ASEAN + 1 Free Trade Agreement (FTA) schemes. vi. As for the ASEAN Single Window, from 1 January 2018, 5 (five) AMS countries, namely Indonesia, Malaysia, Singapore, Thailand and Vietnam, have been carrying out Live Operation e-Form D. join so that ASEAN can immediately implement it in full. 5 https://www.cermati.com/artikel/masyarakat-ekonomi-asean-mea-inilah-yang-perlu-diketahui, December 25, 2019 6|Page vii. The Strategic Action Plan (SAP) for Trade in Goods (TIG) contains outcomes for liberalizing tariffs that are not yet 0%, impacting alcoholic beverage products that Indonesia still places on the General Exclusion List (GEL) and rice and sugar products in the Highly Sensitive List (HSL) . There is a desire by ASEAN member countries to review ATIGA to accommodate the MEA 2025. b) ASEAN Trade in Services i. In an effort to increase economic cooperation through trade liberalization in services, ASEAN countries have agreed and ratified the ASEAN Framework Agreement on Services (AFAS) on December 15, 1995 in Bangkok, Thailand. Since the signing of AFAS in 1995, service liberalization has been carried out through negotiations at the Coordinating Committee on Services (CCS) in package form. ii. At present service trade negotiations have entered the ASEAN Framework Agreement on Services (AFAS) Package 10. Meanwhile, specifically for financial services and air transportation negotiations are carried out at the level of other relevant Ministers (Minister of Transportation and Minister of Finance). Financial services liberalization negotiations are negotiating AFAS 8 while transportation services have signed the 10th AFAS. ASEAN service trade liberalization negotiations used a positive approach. iii. Thus, the service sector opened is limited to the sectors committed by each country. Sectors opened by each country are listed in the Schedule of Commitment (SOC). iv. As of December 2017, 5 (five) countries have fulfilled the 10th AFAS Package, namely Brunei Darussalam, Indonesia, Myanmar, Singapore and Thailand. 2. Displacement of Skilled Workers i. The movement of skilled workers in ASEAN is regulated through the Mutual Recognition Agreement (MRA). ASEAN currently has 8 (eight) MRAs, namely for the profession of engineers, architects, surveyors, general practitioners, dentists, nurses, tourism services and accountants. ii. ASEAN also regulates the movement of other professional workers through the signing of the ASEAN Agreement on the Movement of Natural Persons (MNP) in November 2012. This agreement provides guarantees of additional rights and rules that have been regulated in AFAS about MNPs and also facilitates MNPs in carrying out services in services and investation. 3. Investation i. Investment cooperation is guided by the ASEAN Comprehensive Investment Agreement (ACIA) which has been in force (entry into 7|Page ii. iii. iv. v. force / EIF) starting March 29, 2012. The main objective to be achieved is to create an ASEAN investment area that is liberal and transparent so that it can increase investment flows into the region. Indonesia ratified ACIA on August 8, 2011 through Presidential Regulation No. 49 of 2011 concerning Ratification of the ASEAN Comprehensive Investment Agreement. ACIA contains four pillars of ASEAN investment cooperation, namely liberalization, protection, facilitation, and promotion. The main principle is openness / transparency, equal treatment and international best practices. The investment cooperation forum in ASEAN is under the ASEAN Investment Area (AIA) Council which is the Ministerial Body under the coordination of the ASEAN Economic Ministers which is responsible for overseeing the implementation of ACIA. In carrying out its duties, AIA is assisted by the Coordinating Committee on Investment (CCI). ASEAN 6 countries (Brunei, Indonesia, Malaysia, the Philippines, Singapore and Thailand) remain the main sources of intra-ASEAN FDI, with an average share of 97.6% from 2008-2016. The Coordinating Committee on Investment (CCI) has prepared the ACIA Protocol to Amend. Indonesia in this regard, has ratified the ACIA Protocol to Amend on 12 August 2015 through Presidential Regulation No. 92 of 2015 concerning Ratification of the ACIA Protocol to Amend. The four priority CCI achievements to be agreed upon by ASEAN heads of state at the 2017 ASEAN Summit (ASEAN Summit), namely: (i) completion of the signing of the Second Protocol to Amend ACIA by all ASEAN countries, (ii) completion of the Third Protocol to Amend provisions the ACIA in particular by Thailand, (iii) organizing the Regional Forum on Investment Disputes, Resolution, and Prevention, and (iv) Focused and Strategic (FAST) Action Agenda on Investment. 4. Master Plan on ASEAN Connectivity (MPAC) To improve connectivity between member countries, ASEAN has developed a Master Plan on ASEAN Connectivity (MPAC) which contains various projects and programs for the development of infrastructure, institutions, and relationships among member countries. ASEAN also established the ASEAN Infrastructure Fund (AIF) or the ASEAN Infrastructure Fund (DIA) to support connectivity between ASEAN member countries. 5. Regional Comprehensive Economic Partnership (RCEP) i. At the 19th ASEAN Summit in 2011 during Indonesia's Chairmanship, ASEAN Leaders agreed to consolidate the existing ASEAN Free Trade Agreement + 1 (FTA +1) and form the Regional Comprehensive Economic Partnership (RCEP). 8|Page ii. iii. iv. 6. RCEP has an important meaning to support the pace of economic growth in the region through the integration of existing ASEAN Free Trade Agreements. RCEP will cover 3.4 billion world population (48%), GDP of USD 21.7 trillion (29% of world GDP), and total exports of USD 5.1 trillion (29% of world exports). RCEP's scope includes Trade in Goods (TIG), Trade in Services (TIS), Investment, Economic and Technical Cooperation (ETC), Intellectual Property (IP), Competition, Legal and Institutional Issue (LII), ECommerce, SME , Government Procurement, and Movement of Natural Persons (MNP). RCEP negotiations have entered the 21st round in Yogyakarta, Indonesia on 5-9 February 2018. Of the 18 planned chapters, negotiations have only successfully completed 2 chapters namely on Economic and Technical Cooperation (ECOTECH) at the 15th round in Tianjin, October 2016 and the chapter on Small and Medium Enterprises (SMEs) in the 16th round in Banten, December 2016. Tourism i. ASEAN cooperation in tourism is regulated in the 2016-2025 ASEAN Tourism Strategic Plan (ATSP). ATSP carries the vision of ASEAN as a single destination, with the tagline "One Community Towards Sustainability". ii. Indonesia has ratified the Agreement on the Establishment of the ASEAN Regional Secretariat on the Implementation of the MRA TP through Perpres Number 61 of 2017. As a follow up to the Agreement, currently the draft of the Country Country Agreement (HCA) prepared by Indonesia, as the host, is still being negotiated with the Regional Secretariat represented by the ASEAN countries as the Governing Council. As of the latest negotiations in December 2017 in Nay Pyi Taw, the HCA was agreed not to contain articles on tax exemptions and privatization and immunities for the Regional Secretariat and its officials. HCA negotiations will continue in 2018. 7. ASEAN Economic Cooperation with External Partners ASEAN memiliki kerja sama ekonomi dengan pihak eksternal yang diwujudkan dalam ASEAN+1 Free Trade Area Partners (AFPs), yakni perdagangan bebas dengan Tiongkok (RRT), Jepang, Korea Selatan, Australia dan Selandia Baru, serta India. Sedangkan FTA antara ASEAN dan Hong Kong telah selesai dinegosiasikan pada tahun 2017. 8. MSME Since 2016, the Ministry of Cooperatives and SMEs has acted as a focal point in the cooperation of the ASEAN Coordinating Committee on Micro, Small, and Medium Enterprises (ACCMSME). The cooperation forum bridges the synergy and integration of work programs at the ASEAN level with national work programs, especially in the development of MSMEs. The participation of the 9|Page Ministry of Cooperatives and SMEs in ACCMSME is realized through involvement in MSME development activities and programs implemented in ASEAN member countries, which refers to the Strategic Action Plan for the Development of SMEs in ASEAN (Strategic Action Plan on SMEs Development).6 6 https://kemlu.go.id/portal/id/read/113/halaman_list_lainnya/masyarakat-ekonomi-asean-mea, December 26, 2019 10 | P a g e E. References 1. https://kemlu.go.id/portal/id/read/113/halaman_list_lainnya/masyarakatekonomi-asean-mea 2. https://www.artikelsiana.com/2019/08/pengertian-mea-tujuan-latar-belakangdampak-mea.html 3. https://www.cermati.com/artikel/masyarakat-ekonomi-asean-mea-inilah-yangperlu-diketahui 4. http://sukseskey.blogspot.com/2015/12/mea.html 11 | P a g e
