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Benefits Of ACFTA

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Name: Imam Suwita / aas6m1 Essay question: Is ASEAN-China Free Trade Area (ACFTA) beneficial for Indonesian economic development? Recently, many countries in the world compete to increase trade co-operation at the regional level by making regional trade agreements. These agreements implemented to create conducive situations in dealing with trade liberalization and to face challenges of the global economy in the future. In January 2010, Indonesian government ratified a regional trade agreement with other ASEAN countries and China. This is known as ASEAN-China Free Trade Area (ACFTA). One objective of ACFTA is to increase economic co-operation between member countries. Supriana (2013, p.10) claims that ACFTA creates both benefits and negative …show more content…

Firstly, it can increase the unemployment rate of Indonesia. This condition appears when small and medium enterprises in Indonesia cannot compete with foreign small and medium enterprises in producing high quality products at low prices. For instance, one of the main reasons why small and medium enterprises in Indonesia cannot compete with foreign companies especially with China’s companies is because both countries have the same commodity and have similar export products. There is homogeneity especially in producing and exporting good in the regions. It mean that what is produced and exported from Indonesia, China also produces and exports the same kind of products. They have the same target market. It means that they are competing each other in the same area. Every country that has similar manufacturing activities and export with China more likely to lose their international markets, moreover economic growth in these countries will become slower. (Lardy, …show more content…

Workers are not flexible enough to change jobs and move into more advanced sectors and in the end, this will impact the termination of employment on a large scales. Furthermore, Chinese goods are cheaper than domestic goods it is because China’s products have relatively a lower cost of production. Therefore it can seize the domestic market and decreased the export competitiveness of Indonesian products. Based on previous research, Aslam (2012) showed that consumers bought Chinese products because they were cheap. Business associations in Indonesia realized that they were facing very strong competition with products coming from China and this free trade agreement tended to cause harm to particular important domestic-oriented industries.
In spite of the advantages and drawbacks experienced by Indonesia in implementing this ACFTA agreement, Indonesia must do more research to find ways to get benefits of this agreement. Indonesia can do three things. Firstly, government and entrepreneurs implement new strategies to strengthen manufacturing industry. The new strategies should focus on industries or sectors in which domestic resources can utilize efficiently and optimally. For example, government can help handicraft industries in promoting and finding buyers for their product by arranging international expo

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