Tinjauan

Kerjasama Ekonomi

LPEM FEB UI Kiki Verico, Ph.D.

the LPEM FEB University of Indonesia

KPAT 1
3 February 2020
 01. Globalization: Where are we now?

02. RI’s Condition

CONTENTS 1.
03. Network is Natural

04. Involvement is a Must

05. Involvement Strategy

Globalization: Where are we now?
1.0
 Hodrick-Prescott Filter (lambda=100)
5,000
1870-1949 Klasing and Milionis (2014)
1950-2011 Penn World Tables Version 8.1
2011-2014 Federico & Tena-Jungoito 4,000
2015-2017 Own Estimation

Period of 60’s to 70’s: Accelerating of globalization (IR.3.0), the rise of Japan, followed by South Korea, Oil Boom (Dutch Disease)
Period of 80’s: Slightly Dropped (end of oil boom & start global liberalization)
3,000
600
Period of 90’s: End of Cold War
Period of 00’s: Rise of China & Primary Commodity Price Hike
Period of 10’s to Now: GFC, Arab Spring, Brexit, US phenomenon 2,000
400
Current: Below Potential

1,000
200

0
0

-200

-400
70 80 90 00 10 20 30 40 50 60 70 80 90 00 10

Source: Own Calculation, 2018 VAEX Trend Cycle

 Hodrick-Prescott Filter (lambda=100)
.8
1870-1949 Klasing and Milionis (2014) 1870-1915: First Period of globalization of IR 2.0 (Openness Optimism)
1950-2011 Penn World Tables Version 8.1 1915-1943: 2nd World War (Openness Pessimism)
2011-2014 Federico & Tena-Jungoito 1945-1975: Rise of Japan & South Korea (Openness Optimism) .6
2015-2017 Own Estimation 1980-1990: End of Oil Boom & Rise of Market Liberalization (Openness Moderate)
1990-00: Rise of China & Primary Product Price Hike (Openness Optimism)
2008-Now: GFC, Arab Spring, Brexit, US Phenomenon (Openness Pessimism) .4
Current: Below Potential

.08 .2

.04 .0

.00

-.04

-.08
70 80 90 00 10 20 30 40 50 60 70 80 90 00 10

Source: Own Calculation, 2018 OPENNESS Trend Cycle

ARDL Test: Response to Cholesky One S.D. (d.f. adjusted) Innovations
Variable Coefficient Std. Error t-Statistic Prob.*
“Openness is more Response of VAEX to Innovations
volatile than real VAEX(-1) 1.026561 0.078836 13.02142 0.0000
VAEX(-2) 0.241600 0.104204 2.318522 0.0219 160
trade. VAEX(-3) -0.271270 0.077480 -3.501179 0.0006
Government’s OPENNESS 2481.431 338.6002 7.328499 0.0000
120
OPENNESS(-1) -3811.095 500.1867 -7.619345 0.0000
response is more OPENNESS(-2) 2258.364 548.0852 4.120462 0.0001
sensitive than the OPENNESS(-3) -771.6017 382.4604 -2.017468 0.0456 80
market response” C -23.30879 34.84699 -0.668890 0.5047

R-squared 0.996661 Mean dependent var 928.3753 40

Adjusted R-squared 0.996490 S.D. dependent var 1407.298
S.E. of regression 83.37724 Akaike info criterion 11.73822 0
Sum squared resid 952391.6 Schwarz criterion 11.90245
Log likelihood -843.0209 Hannan-Quinn criter. 11.80495
F-statistic 5841.020 Durbin-Watson stat 2.095678 -40
Prob(F-statistic) 0.000000 1 2 3 4 5 6 7 8 9 10

400 VAEX OPENNESS

VECM Test
200
Impulse Response: Confirm the ARDL Test
Response of OPENNESS to Innovations
.018
0

.016
-200
.014
ARDL: Stability Diagnostic (Recursive Residual): “GFC was really creating
-400 huge impact to the openness & trade globalization. The first wave of .012
pressure happened since early 1970’s (Bretton Woods Collapsed). Therefore
.010
-600 globalization volatility & financial flows are connected”
.008
-800
90 00 10 20 30 40 50 60 70 80 90 00 10 .006
1 2 3 4 5 6 7 8 9 10
Recursive Residuals ± 2 S.E.
VAEX OPENNESS
Source: Own Calculation, 2018
RI’s Condition
2.0
CA: Million USD
IR: Million USD

CAD: % GDP
https://www.bi.go.id/en/moneter/informasi-kurs/referensi-jisdor/Default.aspx
 i=r+Inflation

https://www.bi.go.id/en/moneter
Network is Natural
3.0
Intra- and inter-regional merchandise trade, WTO: Powerhouse
IR 2.0 (1870-1970s)

http://slideplayer.com/slide/6235465/
Source: ASEAN Dashboard, 2017
Intra- and inter-regional merchandise trade, WTO: Powerhouse

PA

NAFTA

CPTPP
RCEP
 Bandwagon/Snowballing/Spillover/
Spaghetti Bowl/Noodle Bowl/ Regional B
Stumbling Block

Leakage: spillover, anti-

Regional A
convergence (divergence)

Building Block (Solid)

Building Block
(Liquid): APEC Effect

Direct Bilateral:
Hub & Spoke Problem,
lose-win condition,
high risk
https://sites.google.com/site/apecharvestlost/
IORA: South Africa, Australia,
Bangladesh, Comoros, India,
Indonesia, Iran, Kenya,
Madagascar, Malaysia, Mauritius,
Mozambique, Oman, United Arab Free & Open Indo
Emirates, Seychelles, Singapore, Pacific (2): Logistic
Somalia, Sri Lanka, Tanzania, vs Silk Road
Thailand and Yemen. 7 dialogue
partner countries, namely the
United States, Britain, Japan, IORA (1): Africa Market
Germany, Egypt, France and the Access
People's Republic of China (PRC)

ASEAN Led (3): Open Regionalism

& Pacific Led: Papua & Nustra, Fiji-
Vanuatu, Indo-Aid 1. Politic: Maritime & Peaceful
Cooperation
2. Economic: Open Cooperation
3. Social (P2P: Human Capital & RnD)
Indo – Japan 2045 Report
 http://wikidpr.org/news/liputan6-72-countries-parliaments-confirmed-their-
https://en.antaranews.com/news/98479/bandung-creative-
presence-at-asia--africa-conference
community-to-launch-asia-africas-young-leaders-video
Indicators to
check
1,140 data with 114
indicators: Size, PPP,
Education, Health,
Capital Formation,
Demand Side,
Environment, EODB,
Electricity
Source: WDI – WB,
2016
Source: Own Calculation, 2017
https://www.msci.com/market-classification
 School of Thought
J.M.Keynes (1883-1946) J.Schumpeter (1883-1950)
1. The General Theory of Employment, Interest 1. Capitalism, Socialism & Democracy; The
and Money Theory of Economic Development (Business
Cycle); History of Economic Analysis
2. Saving – Investment Gap needs FDI Inflows
(production network, IR 2.0/electric machinery 2. It is not a matter of capital, it is about
& mass production) leadership (entrepreneurship)
3. Be Global, Be Competitive, Be Creative & 3. Creative destruction (creative disruption) &
Innovative, Be Inclusive
focus on innovation (RnD)
4. Inclusive (quality of economic growth)
4. Competitive (quantity of economic growth)
5. Modern Sector Enlargement (anti bailout &
5. Modern Sector Enrichment (city oriented); rural empowerment)
Bailout with too big to fail
6. Market Failure - Market Role: asymmetric
6. Market Failure - Government Role: asymmetric information, imperfect competition,
information, imperfect competition, inequality inequality & poverty
& poverty 7. Compatible with IR 3.0 & 4.0
7. Compatible with IR 2.0
Involvement is a Must
4.0
Adjustment Cost to Total Gain
 Risk: Trade Diversion

Source: http://www.asiantradecentre.org/talkingtrade/2016/5/30/transforming-supply-chains-ketchup-in-the-tpp
Benefit: Market Enlargement (Internal & External)

Production Networks, Guang Xi/ECBN, SEZs

Source: http://www.asiantradecentre.org/talkingtrade/2016/5/30/transforming-supply-chains-ketchup-in-the-tpp
Hill, 1990: Production Network of Indonesia in Asia enters Aussie’s market Source: Resosudarmo, Verico, Pasaribu, 2015
Involvement Strategy
5.0
 Total Business
BFTA of RI Government
Score Association

Indonesia-Korea Comprehensive
Economic Partnership Agreement
(IKCEPA))
680 482 198
Indonesia-EFTA Comprehensive
Economic Partnership Agreement
(IECEPA)
660 472 188
Indonesia-Iran Preferential Trade
Agreement (IIPTA)
637 469 168
Indonesia-Australia
Comprehensive Economic
Partnership Agreement (IACEPA)
632 460 172
Indonesia-Chile Comprehensive
Economic Partnership Agreement
(ICCEPA)
611 419 192
Source: LPEM Study for MoT, 2015
Tujuan Ekonomi (Growth) & Peran Pemerintah
Apa yang paling penting bagi ekonomi? Growth! (H-D; S-I; Solow; C-D)

1. Kebijakan Fiskal→ Crowding-Out→ Investment (i)

2. Kebijakan Proteksi→ Ineffective merchantilism→ Net Export (ner)

Mengapa pemerintah penting dalam ekonomi (micro view)?

1. Asymmetric Information
2. Imperfect Competition
3. Externalities
4. Public Goods
 The Future of the ASEAN Economic Community

FTA FTA+ EC CM SMU SC

ASEAN Free Trade Area AJFTA, ACFTA, AKFTA, ASEAN Economic If follows EU’s time If follows EU’s time If follows EU’s time line
(1986:CU failed;1992:AFTA RCEP, Others Community line then achieve line then achieve then achieve SC in 2050.
agreed,1999:full (2008,2010,2006, without CU ASEAN Single SM in 2045. 2045-2050:
commitment,CEPT10/5/0: 2013) (2015) Market (ASM) in 2035-2040:ASM ASC preparation
2002,2010,2015) 2035 until 2040 2040-2045:
SMU Preparation

Regional Trade Arrangement

(1976)
Treaty of Amity & Cooperation/TAC

Source: http://asiapacific.anu.edu.au/blogs/indonesiaproject/2013/05/03/asean-economic-integration-challenges-and-strategies/
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