Essay ini saya tulis beberapa waktu yang lalu, tapi ga di publish kemanapun karena ga PD, hehe. Pertama karena saya nulis sesuatu yang saya ga ngerti tapi pura-pura ngerti, yang kedua karena sok-sok an pake bahasa Inggris. Tapi akhirnya saya post juga disini. Ya namanya juga menyatakan ide, siapa tau da yg kasih saran dan kritik..oke, ini tulisannya:
Anticipating the Negative Effects of ACFTA by Increasing Industrial Competitiveness
Since it was launched on the 1st of January 2010, ASEAN – China Free Trade Agreement (ACFTA) is the world’s biggest regional free trade agreement, measured by population (Coates 2009; Brown 2010; Walker 2010). ACFTA is incorporating China and the six founding members of ASEAN; Indonesia, Malaysia, Singapore, Thailand, Philippines, and Brunei. Four other ASEAN countries will follow in 2015. ACFTA creates an economic region with almost 1.9 billion consumers, a combined regional Gross Domestic Product (GDP) of about US$6 trillion (Brown 2010), and a total trade estimated at US$1.23 trillion per year (Cordenillo 2005). ASEAN, which has a population of 580 million and a combined economy bigger than that of India, has substantial reserves of resources such as oil, natural gas, coal, and other commodities that China desperately needs to keep its factories operating. China, which runs a substantial trade surplus with ASEAN, stands to benefit hugely from easier access to sells their products (Brown 2010). They began the industrialization in the 1960s and continue to increasing until now which has made them one of the world’s economic powers. China’s GDP has increased at an average annual rate of nearly 10% (Morrison, 1998). China has overtaken the United States of America to become the 3rd largest trading partner of ASEAN after Japan and the European Union (Moore 2009). Based on that enormous economic potential, many sides expect this agreement will expand ASEAN’s trade and increase regional economic growth including Indonesia. But it also raises concerns among Indonesian Industries. ACFTA will have negative impacts on the Indonesian industrial sector if its competitiveness is not improved.
II. Negative Effects of ACFTA on Indonesian Industrial Sector
One of the negative effects that will arise after the enforcement of ACFTA is Chinese domination of the Indonesian domestic market. China could dominate the market with their low price products. Indonesia with more than 200 million of people is a potential market for Chinese products. For certain products, Chinese goods have lower price than Indonesian products, even lower than the price of Indonesian raw materials. It happens because production costs in China are very low associated with low wage labors, reverse engineering system, and mass production system on their industries. For example, a local sack for sugar, rice, and fertilizer costs about Rp.1,600 (US$ 1.70) each whereas a Chinese sack costs about Rp.800 each (Coates 2009). Due to its lower price, many Indonesian consumers prefer to consume or to use Chinese products than domestic products. Indonesian consumers may not care about the origin of the products. Consumers generally only see the quality and price. Indonesian Central Statistical Agency (BPS) reported that number of poor people in Indonesia is 14.15% (Anon. 2010). Most Indonesian consumers have low purchasing power, and so it is reasonable for price to be the main consideration when choosing a product. Consumers are not too sensitive to the quality or brand, even the genuineness of the products does not necessary for them. According to those different price conditions and consumers tendency when choosing a product, will be very easy for China with its economic strength to dominate Indonesia which is still growing and have a lot of reliance to foreign countries.
In connection with Chinese products domination in the Indonesian domestic market, Indonesian industries with their products will have to compete against those Chinese products. This could have negative effects on Indonesian industrial sectors, especially on middle-low industries. Up to December 2010 there were at least fourteen industry sectors in Indonesia stated that they have not ready yet to facing ACFTA such as; textile, rubber, steel, cocoa processing, electronics, automobile, footwear, and cosmetics (Coates 2009; Santoso 2009). If those industrial sectors do not prepare themselves to face ACFTA, they will fail to compete with Chinese products. Failure to compete may be a market decline. The tendency of Indonesian consumers to take the price as the main consideration when choosing a product would cause a decline in domestic product consumption. For example, the Indonesian Footwear Association stated that Chinese firms would take their share of the Indonesian market from 40 percent to 60 percent (Coates 2009; Moore 2009). Similar condition could also occur to the other industrial sectors. If that market decline condition persists, the Indonesian industrial sector could suffer a great deficit.
In addition, decreasing number of consumers in the industrial sector should be equal to benefits lose. Example of actual deficit can be seen in the garment industry sector. Due to the implementation of FTA processes which began in 2004, the textile and garment industries began to encounter a deficit in 2006 and continue to deteriorate each year. In 2006 the textile industry experienced a 107 million US dollar deficit, the year 2007 reached 186 million US dollars, the year 2008 reached 859 million US dollars, in 2009 reached 895 US dollars, and in 2010 the deficit is expected to reach 1.2 billion US dollars (Anon. 2009). Thereafter, they might be unable to cover the production cost and use capital reserves to maintain their activity and some industrial sectors might be collapse if they continuously unable to obtain profit.
Another adverse effect that may occur is the increasing number of unemployment. Millions of workers in the formal sector will lose their jobs as many manufacturing companies are expected to be unable to compete with Chinese products that will flood the Indonesian market. Termination of employees is a common ways to reduce the production cost of an industry. Estimated number of new unemployment could reach 40,000 people from the textile industry sector (Coates 2009), and it could be millions new unemployment in total (Anon. 2010). If those conditions really consist, Indonesia will face the complicated social and economic problems such as increasing poverty and crime.
III. Anticipative Actions
In order to anticipate the negative effects of ACFTA implementations on Indonesian industrial sectors, one of the solutions is to enhance industrial competitiveness. Enhancing industrial competitiveness can be approached by intensifying the technology, improving the management system, and conducting market expansion. Applying appropriate technology on industries could improve productivity, quality, and also reduce production costs. For example, application of semi-mechanical extraction method of handling Sago flour to produced dried starch in Kendari has increased the productivity by up to 50% (Samad 2002). Technology requires substantial capital investment at the beginning. Despite that, the benefit will be obtained thereafter. Subsequently, improving the management system could improve effectiveness and efficiency of production process which related with productivity and quality of industrial products. If the domestic industries have been able to apply appropriate technology and improve its management system, so they are not only able to compete with China but are also likely to be able to expand into overseas market. Moreover, implementation of Free Trade Agreement also means greater opportunities for Indonesian industry to develop its market overseas, so it could change the domestic market share which taken by China.
However, it would be very difficult for Indonesian domestic industrial sector if they have to compete with Chinese industry without government support. Government should protect domestic industry with its policies (Judarwanto 2010). First is to impose Standar Nasional Indonesia (SNI) for all industrial products both locally and imported. SNI will be a filter for imported products, so that only products that satisfy the standard quality are allowed to enter Indonesia. On the other hand, the SNI will force domestic industries to improve their products quality. The next is the ease of financing for domestic industries especially middle-low industries. Ease of financing can be a long-term equity loan with low rates interest rates. Hence, domestic industries will be able to intensify technology, improve the system management, and expand their market with that additional equity. In addition, government should also be able to eradicate smuggling. The entry of products which smuggled illegally could also threaten domestic industries. Very clear that government has a vital position to save and protect domestic industries to face global competition.
In the end, global competition is something that must be faced especially since the Free Trade Agreement was signed. All the countries should take advantages of the implementation of ACFTA. Indonesian industries must improve their competitiveness in order to counter possible negative effects resulting from the implementation of ACFTA. Cooperation between domestic industries and government is one of the best ways to make domestic industries have high competitiveness. In the short term there will be some adjustment that some countries have to make. Still, the advantages will be achieved in the next few years (Coates 2009).