The Political-Economy of ASEAN-China Free Trade Agreement - An Indonesian Perspective

Abstract

The enactment of the regional economic cooperation scheme ASEAN-China Free Trade Agreement (ACFTA) is an interesting phenomenon accompanying political-economic changes in the East Asian region. The regional economic cooperation scheme first proposed by then-Chinese Prime Minister Zhu Rongji in 2000 was driven more by political considerations. China's rise as a global economic power was seen as a threat to ASEAN. Accordingly, China’s involvement in regional forums is considered very important for ASEAN in creating regional stability. ASEAN-China FTA is an economic instrument, which is also part of ASEAN’s political agenda to support regional stability. Indonesia, as the most influential country in ASEAN, supports regional economic cooperation, and always emphasizes the importance of ASEAN centrality in the face of uncertain changes in the world political economy. Unfortunately, Indonesia's support to ASEAN-China FTA, and Indonesia’s stance on ASEAN centrality, turn out to be expensive in the socio-economic costs, namely: (i) Indonesia’s unpreparedness in building the competitiveness of its economy, in line with the integration of the national economic system into the wider regional economy, and (ii) the economic unpreparedness actually caused by sharp differences of interest among domestic actors and exacerbated by the weakness of the government to overcome the differences.