In 2003, under the Bali Concord II, ASEAN agreed to create the ASEAN Economic Community (AEC) by 2015. The AEC will establish ASEAN as a single market and production base that, in theory, will make the regional grouping more dynamic and competitive, leading to greater economic development.
The planned ASEAN single market and production base will comprise five principle elements: the free flow of goods, services, investment, capital and skilled labor. In theory, a single market has many benefits. Proponents believe that with the free flow of all factors of production between member countries, the allocation of all the factors of production will be more efficient, and thus lead to increased productivity.
Given that ASEAN member nations vary widely in their economic and sociopolitical development, however, applying a single market naturally has raised doubts among some. For Indonesia in particular, which is ASEAN’s largest country and boasts its biggest economy, will the AEC’s single market work for us?
The AEC spirit is deeply rooted in economic liberalization. However, as many have argued, economic liberalization has not always translated into equitable and balanced development and an improvement in people’s welfare. For Indonesia, there are at least three problems arising from the creation of a single market. The first concerns industrial relations policies, which also relate to manpower policies. Both of them are weak. Read More
