ASEAN Economic Community (AEC): Indonesia's Opportunities and

Challenges
As the global economy crisis continues to spread, Indonesian economy in 2016 is
predicted to face more challenges than it had in 2015. On 1 st January 2016 however, will also
become another year for Indonesia to evolve economic opportunities in which the ASEAN
Economic Community (AEC) officially begins. The implementation of AEC could be either a
solution or a threat for the AEC members including Indonesia.
With the giant economic powers of China and India, global economic gravity has been
shifting toward Asia. The economic importance of Southeast Asia should also not be
underestimated. A recent Asian Development Bank report states that -if the Association of
Southeast Asian Nations (ASEAN) were one economy- then it would be the seventh-largest
economy in the world (having a huge market of USD $2.6 trillion).
The AEC is ultimately designed to create a single market and production base within
ASEAN. In order to achieve this, ASEAN created the AEC Blue Print which rests on four pillars:
integrate the region into a single market and production base; turn Southeast Asian into a highly
competitive region; ensure equitable development across ASEAN and to fully integrate ASEAN
into the global economy. The AEC also implies that member countries have to reduce
protectionist measures and open up politically and economically-sensitive sectors such as natural
resources. Recently, Indonesian President Joko Widodo said the Indonesian government has to
reduce protectionism as well as cut generous subsidies because it makes the country's businesses
less competitive. Instead, the government unveiled a series of economic stimulus packages that
include deregulation to strengthen domestic businesses.
Within Southeast Asia, Indonesia is the largest economy, has the largest population
size and the largest land area. With more than 250 million inhabitants, Indonesia accounts for
nearly 42 percent of the total population within the ASEAN market. This implies that Indonesia
has a huge market. However, with the country's logistics costs high (mainly due to the lack of
adequate quality and quantity of infrastructure) and the quality of human resources relatively
low, there is concern that Indonesia merely becomes a consumer (importing and consuming
products and services from other ASEAN nations) while existing production bases in Indonesia
may be overtaken.
Generally speaking, the implementation of this ASEAN single market could benefit
Indonesia in terms of its potential prospects such as 1). Getting information easier and quicker;
2). Creating as well as enhancing jobs and employments opportunities; 3). Stimulating
improvement of local and national economy stability; 4). Enhancing domestic productivity both
in quality and quantity; 5). Increasing the national income (domestic foreign exchange) through
export-import taxes. On the other hand, the country could at the same time suffer from the
negative impacts of the AEC implementation, for instance Indonesia will be flooded by overseas
product, which would lead to a detriment in the domestic industries. In addition, the freely

foreign investments into Indonesia will cause the over-exploitation of natural resources in the
country.
Putu Bella Suandewi Putri Subrata / 1607341085