THE ASEAN

I N T E G R AT I O N
The influence of regional
I

trading organizations on
business undertakings of
Indonesia
 T R ADE AGR EE M ENT S

Indonesia is a party to the region-wide Association of Southeast Asian Nations (ASEAN) Free Trade
Area. ASEAN, and by extension Indonesia, also has preferential trade agreements with Australia,
China, Hong Kong India, Japan, Korea, and New Zealand and concluded text-based negotiations of the
Regional Comprehensive Economic Partnership in November 2019. Indonesia has signed bilateral free
trade agreements (FTAs) with Australia, Chile, Mozambique, as well as with Iceland, Liechtenstein,
Norway, and Switzerland under the European Free Trade Association, but as of the end of 2019, none
of these FTAs are yet in force except with Chile. Indonesia recently concluded negotiations with Korea
on a Comprehensive Economic Partnership Agreement. Indonesia is negotiating other FTAs with the
European Union (EU), India, Tunisia, and Turkey as well as reviewing its trade agreements with Japan
and Pakistan.
Indonesia is a member of the free trade arrangement between ten ASEAN member states and China.
The initial framework was signed on 4th November 2002.
 Do You Agree?

We hope that through these trade arrangements, through

collaboration in training, in manpower development, and what
have you, ASEAN in, say, ten years' time, will be a very
different ASEAN.

-Sellapan Ramanathan
• Since its founding on August 8, 1967, ASEAN has been a major focus of
Indonesia's regional international relations.

• In ASEAN Indonesia, together with Brunei, Malaysia, the Philippines,

Singapore, and Thailand, helped construct a regional multinational
framework to facilitate economic cooperation, diminish intra-ASEAN
conflict, and formulate ASEAN positions regarding perceived potential
external threats.

• From the point of view of Jakarta--the site of ASEAN's general secretariat--

ASEAN's predecessor organizations had been flawed. The Southeast Asia
Treaty Organization (SEATO)--established in 1954 and composed of
Australia, Britain, France, New Zealand, Pakistan, the Philippines, Thailand,
and the United States--included only two Southeast Asian members.
• Established as part of the network of United States security alliances, SEATO was
seen as violating the principle of nonalignment. The Association of Southeast Asia
(ASA)-- established in 1961 and composed of Malaya (as Malaysia was then
known), the Philippines, and Thailand--was seen by Jakarta as suspect because of
the overlapping SEATO memberships of two of the members.

• In 1963 the proposed non-political confederation Maphilindo (for Malaya, the

Philippines, and Indonesia) was, for Jakarta and Manila, a tactic to prevent or delay
the formation of the Federation of Malaysia. Manila had its own claim to Sabah
(formerly North Borneo) and Indonesia protested the formation of Malaysia as a
British imperialist plot. When Maphilindo failed, Indonesia turned to political and
military Confrontation, an attempt to undermine the new state of Malaysia.
• Sukarno's radical anti-Western rhetoric, combined with the growing strength of the
PKI, marked Indonesia as a disturber of the regional international order rather than a
cooperative, peaceful contributor to it.
• By 1967 Indonesia's disruptive stance had changed. ASEAN provided a
framework for the termination of the Indonesian Malaysian Confrontation,
allowing Indonesia to re-join the regional community of nations in a
nonthreatening setting.
• Furthermore, the five founding members of ASEAN (Brunei became a member in
1984) now shared common policies of domestic anticommunism. The ASEAN process
of decision making by consensus allowed Indonesia to dictate the pace of change
within ASEAN. Some observers asserted that ASEAN moved only at the pace of its
slowest member, which often was Indonesia.
• With ASEAN increasingly seen as a symbol of regional peace and
stability, its maintenance became an end in itself in Indonesian foreign
policy. Suharto became ASEAN's elder statesman by the time of ASEAN's
1992 Fourth Summit in Singapore. He was the only head of government
at ASEAN's 1967 establishment or at the 1976 Bali First Summit who was
still head of government in 1992.
• Within the ASEAN framework, Jakarta was hesitant about
committing itself to permanent structures and agreements that
would facilitate functional integration. In particular, Indonesia was
resistant to market sharing, fearing that its market, by far the
largest in ASEAN, would be swamped by the exports of its more
competitive ASEAN partners.
• It was only reluctantly that Indonesia agreed to accept in principle the ASEAN Free Trade
Area (AFTA) contained in the fourth summit's document, "Framework Agreement on
Enhancing ASEAN Economic Cooperation." Although committed to AFTA in theory,
Indonesia, again as ASEAN's slowest paced member, won a fifteen-year delay of the
implementation of AFTA, and the mechanism of the Common Effective Preferential Tariff
was adopted as the instrument of transition.
• This measure meant that a future exemptions list would dictate the economic significance
of items in the Common Effective Preferential Tariff's broad trade categories.
• Moreover, there was some question as to whether Indonesia was outgrowing ASEAN in
terms of economic cooperation. Indonesia invested the Asia Pacific Economic Cooperation
(APEC)--a grouping of ASEAN members and major East Asian and Pacific trading
countries established in 1989--with greater significance than some of its ASEAN partners.
• It was Indonesia's desire to promote broad multilateral forums, such as
APEC, that led it to resist more narrowly based schemes such as the East Asia
Economic Grouping proposed by Malaysia, which in its original formulation
had the exclusive trading bloc characteristics of Japan-based general trading
companies. The Malaysian plan was downgraded at the Singapore ASEAN
summit to a proposed caucus and referred to committee.
• Although Indonesia was the last member nation of ASEAN to embrace
fully the organization's economic potential, its leaders saw early that
ASEAN could be used as a vehicle to promote a regional political
identity. Through ASEAN, Indonesia became the most articulate
advocate of a Southeast Asian Zone of Peace, Freedom, and Neutrality
(ZOPFAN) and a Southeast Asian NuclearFree Zone (NFZ).
• The ZOPFAN ideal was enshrined in the 1971 Kuala Lumpur Declaration and
given lip service by all ASEAN members. Since the July 1984 Seventeenth ASEAN
Ministerial Meeting, Indonesia insisted on giving the ZOPFAN ideal high priority.
Between the third (1987) and fourth (1992) ASEAN summits, a major alteration
in the regional political-military power presence of the former Soviet Union and
the United States lessened the urgency for such a treaty. Although the Fourth
Summit's Singapore Declaration of 1992 stated that ASEAN would continue to
seek the realization of a ZOPFAN and NFZ, it would be done "in consultation
with friendly countries, taking into account changing circumstances [emphasis
added]."
• Indonesia's vigorous push for these zones involved a number of foreign policy interests that
corresponded to other policy goals. As a leading nonaligned power, one of Indonesia's
consistent policy goals was to reduce regional dependence on external military powers.

• Second, the zones would improve the prospect of integrating Vietnam, Cambodia, and
Laos into a wider, peaceful Southeast Asian international order. The zones responded to
the residual xenophobic element of Indonesian nationalism. The accomplishment of a
nuclear-weapons-free ZOPFAN would heighten Indonesia's profile as a middle power
with international aspirations.

• One of the reasons why some ASEAN nations were reluctant to embrace the zones fully
was the perception that one outcome might be to enhance a regional hegemonic role for
Indonesia. The question of Indonesia's future regional role was made more pertinent once
the need for ASEAN solidarity on the issues posed by the Vietnamese invasion and
occupation of Cambodia in 1978 passed.
GR OUP MEM BER S

Maica Adrianne Como Danica Nuarin Maria Mhia Janrio Yap

Thank you!