Analysis of ASEAN Economy Community Implementation in

Indonesia International Trade to ASEAN Countries

Ary Miftakhul Huda, Nadia Dewi Hartono, and Danny Heru Dwi Hartanto

Master Student of Public Policy Department in Universitas Airlangga

Keywords: AEC, Wilcoxon, trade, export, import

Abstract: ASEAN Economy Community (AEC) which was implemented in early 2016, has made free international

trade possible in the ASEAN region. One of the main focuses of AEC is to increase trade between ASEAN

countries. Therefore, AEC hopefully can give significant impact on Indonesia trade after its implementation.

This research discusses whether the value of Indonesia's exports and imports to ASEAN countries is

significantly different or equal by comparing before and after AEC implementation, using a non-parametric

statistical approach. The data of Indonesia's exports and imports to ASEAN countries are from Badan Pusat

Statistik (BPS-Statistics Indonesia) that has been processed by Ministry of Trade, Indonesia. The value of

Indonesia's exports and imports to ASEAN countries in 2015 is classified as before the AEC implementation

and that data in 2016 is classified as after AEC implementation. The statistical method used in data analysis

is the Wilcoxon Test. With 95% confidence level, the researcher confirms that the value of Indonesia's exports

and imports of trade to ASEAN countries is significantly equal before and after the implementation of AEC.

Because of it, the implementation of the AEC is considered to be less than optimal to increase trade between

ASEAN countries.

1 INTRODUCTION

ASEAN Economic Community (AEC) is a

realization of a major economic region. AEC views

ASEAN as a single market and production in a

competitive region with globalization. When AEC is

realized, the characterization of ASEAN will turn into

free trade, products, and investments. With

harmonious trade and investment laws, ASEAN, as a

regulatory organization will be strengthened and

become more attractive as a single investment

destination.

The idea of forming an actual ASEAN

Community has been proposed since 2002 finally

realized. ASEAN Community can not stand alone,

supported by three main pillars, namely ASEAN

Socio-Cultural Community, ASEAN Political-

Security Community, and ASEAN Economic

Community. In addition to the more excited, AFTA,

AEC, is also a response from the efforts of ASEAN

countries in order to avoid the economic work that

happened in 1997-1998.

Moreover, AEC, is to accommodate the economic

goals of each country in order to increase endurance

with a practical East Asian economy fast. The goal of

AEC itself in the blueprint is the establishment of a

single ASEAN market based on the liberalization of

goods, investment, capital, and skilled labor. In

addition, there are three other objectives, namely (1)

increasing regional competitive power, (2)

generalizing economic development, and (3)

economic integration to global level. Without the loss

of AFTA, AEC is a platform for all kinds of economic

cooperation that has been established by intra-

ASEAN. "AEC provides a comprehensive framework

for building existing ASEAN integration programs,

such as AFTA, AFAS and AIA".

Liberation and economic integration have a level

of urgency if ASEAN wants to exist and is oriented

to the success of the European Union. Therefore,

AEC, which was originally implemented in 2020 in

accordance with ASEAN Vision 2020, but in 2007 -

at the 12th ASEAN Summit in Cebu - it was agreed

that the target of implementing AEC would be

accelerated to 2015. This acceleration clearly led to

the controversy the optimist and the pessimist.

Thus, the research of AEC has been interesting

topic for researchers around the world. "The

exchange rate and inflation are of particular concern

after the implementation of free trade" (Malauw,

2016, PP 45). This is evidence of increasingly intense

trade competition between countries that bring its

Huda, A., Hartono, N. and Hartanto, D.

Analysis of ASEAN Economy Community Implementation in Indonesia International Trade to ASEAN Countries.

DOI: 10.5220/0010272500210025

In Proceedings of Airlangga Conference on International Relations (ACIR 2018) - Politics, Economy, and Security in Changing Indo-Paciﬁc Region, pages 21-25

ISBN: 978-989-758-493-0

own impact, especially on developing countries like

in ASEAN. Such competitiveness is called "the

competitiveness of the WEF version, which is the

competitiveness of each country, not the product"

(Apriliana, 2016, PP 3). Grossman and Helpman

(1991) prove that the opening of trade will be

followed by the transmission of knowledge so that in

general will increase economic growth. This means

that a country will experience an increase in

economic growth.

However, researchers found that "Referring to the

Global Competitiveness Report 2012-2013,

Indonesia ranks 46th out of 144 countries surveyed

by the World Economic Forum (WEF). The rating of

Indonesia is well below the position of Singapore

which is almost every year ranked second (2) world

and first (1) ASEAN "(Apriliana, 2016, PP.3). This is

not separated from the global market structure of

export-import which is an external factor that affects

competitiveness. Meanwhile, according to data from

Asean Sekertariat shows the gap of export-import

influence on GDP in Asean countries. Indonesia itself

lags far behind its neighbors Brunei Darussalam,

Malaysia and Singapore. Recorded in the data, the

ratio of the effect of exports to GDP Indonesia

reached 27.7 percent, while Brunei, Malaysia,

Singapore, respectively are 65.8, 100.2, and 250.3.

Similarly, the ratio of imports to Indonesia's GDB is

well below the percentage of two countries: Indonesia

16.8, Malaysia 81.8, Singapore 180.3 per cent, but

slightly above Brunai reaching 12.9 per cent. Really

a considerable ratio interval considering the

proximity to these countries in one region.

With regard to trade between countries, according

to (Chia, 2013, PP.4), "Asean Economic Community

itself originated from the establishment of Afta

(Asean Free Trade Area) in 1992 which is a serious

effort of Asean in this regard". Initial barriers include

the expansion of substitution of imported

industrialization policy, the smallness of intra-

ASEAN trade, and wide differences in economic size,

level of development, and industry competence that

lead to very different perceptions of the benefits and

costs of integration. The shift to external development

strategies and external pressure (such as the

establishment of the EU Single Market and the North

American Free Trade Area) suppresses ASEAN to

form a free trade zone, Afta. The challenges of

globalization, the slow recovery from the Asian

financial crisis, and the economic revival of the

People's Republic of China and India further

suppressed ASEAN into deep integration in 2003

with the establishment of the ASEAN Economic

Community (AEC). Research about AEC is also

conducted by other authors

[3,5,6,7,9,10,11,12,13,15] and [16].

In relation to the above matters, the authors want

to conduct research related to AEC which came into

effect in early 2016, especially the impact of AEC on

Indonesia's international trade sector to Southeast

Asian countries. The purpose of this study is to

evaluate the impact of export and import value of

Indonesia to ASEAN countries before and after the

implementation of the AEC.

2 METHODS

To evaluate the impact before and after the

implementation of AEC on the value of Indonesia's

exports and imports to ASEAN countries, the authors

conducted an analysis with the approach of Public

Policy Evaluation Theory by Finsterbusch and Motz

(1980), ie single program in before and after type.

Thus, the authors evaluate the data of export value

and import value in 2015 as the data of export value

and import value of Indonesia to ASEAN countries

before the implementation of AEC, then the data of

export value and import value in 2016 as data of

export value and import value to country - ASEAN

countries after the implementation of the AEC. The

null hypothesis used is the value of Indonesia's export

and import value to ASEAN countries before and

after the implementation of AEC is the same.

In this study, the authors conducted the wilcoxon

test of two dependent samples. Daniel (1989)

explained that the wilcoxon test of two dependent

samples is a test used for the case of two dependent

samples when the measuring scale allows to

determine the relative magnitude of differences or

differences that occur, not just different observations.

The data used in this study is secondary data

derived from the Central Bureau of Statistics

processed by the Ministry of Trade of the Republic of

Indonesia. This data is the data of the value of the

realization of Indonesia's exports and imports to

ASEAN countries for oil and gas and non-oil and gas

sectors in 2015 and 2016. Then, analyzing with the

data using Wilcoxon Test in a 95% confidence level.

The purpose of data analysis with Wilcoxon Test is to

know the value of Indonesia's exports and imports to

ASEAN countries significantly different or not in

before or after the implementation of AEC.

ACIR 2018 - Airlangga Conference on International Relations

3 RESULTS

Figure 1: Realization of export value of Indonesia to

ASEAN countries.

The total value of the realization value of Indonesian

exports to ASEAN countries in 2015 amounted to

32,961,904,063 US $. The total export value has

increased in 2016 amounting to 33,215,242,469 US

$. However, the increase is considered relatively

small despite the implementation of the AEC has

come into effect in early 2016. The gap in the value

of Indonesia's exports to ASEAN countries in 2016

decreased amounted to 4,110,372,776 US $, when

compared with the year 2015 amounted to

4,337,389,815 US $. However, the value of the gap is

still considered large because it exceeds the average

value of Indonesian exports to ASEAN countries in

2016 amounted to 3,690,582,497 US $ and in 2015

amounted to 3,662,433,785 US $. Therefore, this

shows that the value of exports with destination

countries in the ASEAN region is still dominated by

several countries only.

In addition, the value of Indonesia's exports to

countries in the largest ASEAN region in 2015 and

2016 is with the destination country of Singapore.

Thus, Singapore became the export destination

country with the highest export realization value

compared to other countries in the ASEAN region,

which amounted to 12,632,634,285 US $ in 2015 and

11,860,980,459 US $ in 2016. On the contrary,

Myanmar became export destination country with the

lowest export realization value compared to other

countries in the ASEAN region, which amounted to

615,670 US $ in 2015 and 615,684 US $ in 2016.

Figure 2: Realization of Import Value of Indonesia to

ASEAN countries.

The total value of the realization of Indonesia's

import value to ASEAN countries in 2015 amounted

to 38,634,670,496 US $. The total value of imports

decreased in the year 2016 amounted to

34,583,740,133 US $. However, Indonesia's import

value gap in ASEAN countries in 2016 decreased by

5,206,196,392 US $, compared to 2015 which

amounted to 6,200,343,539 US $. However, the value

of the gap is still considered great because it exceeds

the average value of imports of Indonesia to ASEAN

countries in 2016 amounted to 3,842,637,793 US $

and in 2015 amounted to 4,292,741,166 US $.

Because of it, it shows that the import value with

destination country in ASEAN region is still

dominated by several countries only.

In addition, the value of Indonesia's imports to the

countries in the largest ASEAN region in 2015 and

2016 is with Malaysian destinations. Thus, Malaysia

became the import destination country with the

highest import realization value compared to other

countries in the ASEAN region, which amounted to

18,022,485,606 US $ in 2015 and 14,548,298,535 US

$ in 2016. On the contrary, Myanmar became the

import destination country with the lowest import

realization value compared to other countries in the

ASEAN region, which amounted to 160,418 US $ in

2015 and 113,340 US $ in 2016.

Meanwhile, when comparing the value of the

realization of exports and imports for Indonesia's oil

and gas and non-oil sectors to ASEAN countries,

there is a deficit as both the value of oil and gas and

non-oil / gas exports in 2015 and 2016 that are less

than the realization value of imports by 2015 and

2016. This means that the presence or absence of

AEC does not affect Indonesia's international trade

rate with ASEAN countries.

Table 1: Wilcoxon Test Result.

Trade N Z Pvalue

Export 9 -0,770* 0,441

ort 9 -0,059* 0,953

*α=0,05

Table 1 shows the test results of realization data

of export and import values before and after the

implementation of AEC statistically using Wilcoxon

Test with a value of α = 0.05 or a confidence level of

95%. In the test of the realization of export value, the

null hypothesis used is the median value of

Indonesian exports to ASEAN countries before and

after the implementation of AEC is the same. The

statistical test results show that Pvalue (0.441)> α

(0.05), thus failing to reject the null hypothesis. This

means that the export median value of Indonesia to

ASEAN countries before and after the

‐

5000000000

10000000000

15000000000

2015

2016

‐

10000000000

20000000000

2015

2016

Analysis of ASEAN Economy Community Implementation in Indonesia International Trade to ASEAN Countries

implementation of AEC is the same. Therefore, AEC

has no effect on the value of Indonesia's exports to

ASEAN countries.

In addition, table 1 also shows the results of

statistical tests of realization of import value of

Indonesia to ASEAN countries. The null hypothesis

used is the median value of Indonesian imports to

ASEAN countries before and after the

implementation of AEC is the same. The statistical

test results show that Pvalue (0.953)> α (0.05), thus

failing to reject the null hypothesis. This means that

the median value of Indonesian imports to ASEAN

countries before and after the implementation of the

AEC is the same. Therefore, AEC has no effect on the

value of Indonesian imports to ASEAN countries.

4 DISCUSSION

Based on the results of data analysis conducted with

Wilcoxon Test using 95% confidence level, it can be

seen that the value of the realization of Indonesia's

exports and imports did not experience significant

differences before or after the implementation of

AEC. This means that the AEC has no impact on

Indonesia's international trade. This is certainly

unfortunate because one of the main objectives of the

AEC to mobilize and improve the trade sector among

countries in the ASEAN region, is not achieved

optimally.

Indonesia's trade balance is likely to deficit due to

the total value of import realization which is greater

than the total value of export realization, especially

for oil and gas and non-oil sectors to destination

countries in ASEAN region. Indonesia's trade deficit

to ASEAN countries already occurred before the

AEC came into force. According to the Central

Bureau of Statistics (BPS) in the history of the last 15

years (2000-2015), Indonesia once reached a trade

surplus in 2011. After that, trade balance deficits tend

to widen from year to year. In addition, although AEC

comes into effect in early 2016, trade balance deficits

continue to occur in 2016. Therefore, AEC is

expected as a trading area capable of driving the

economic sector for its member countries is not

running optimally. The decline of the global economy

continues to affect each country in implementing

international trade.

The condition of the deficit trade balance is

certainly not profitable for Indonesia. Although the

largest population in comparison to other countries in

the ASEAN region, Indonesia is still unable to

maximize the value of export realization, so that

Indonesia is only a target market rather than being a

superior market player in the ASEAN region.

Because of it, in order to optimize international trade

transactions in the AEC, the Government of

Indonesia needs to evaluate the causes of the annual

trade deficit, so it is hoped that after knowing the

main problem causing trade deficit, the international

trade in AEC can run optimally.

Indonesia's trade deficit in ASEAN is also

reviewed by Syadullah (2017), which explains that

one of the causes of Indonesia's trade balance deficit

with countries in the ASEAN region is low foreign

power, especially manufactured products. Based on

the results of studies conducted Syadullah, the

Government can focus on improving product

competitiveness for business actors so that the

product is superior and able to compete in the

ASEAN free market.

Although Indonesia is experiencing a deficit for

the total realization of export and import value to

ASEAN countries, but there are several ASEAN

member states that show the surplus conditions in the

trade balance, such as Singapore, Vietnam,

Cambodia, Brunei Darussalam and Myanmar. This

can be an opportunity for Indonesia to increase trade

to these countries, through establishing good inter-

country trade cooperation relationships.

On the other hand, the Government of Indonesia

needs to focus also on countries in ASEAN that are

less than optimal trade so that the trade balance

becomes a deficit, such as Malaysia, Thailand and

Laos. There needs to be an approach through bilateral

trade with these countries to increase trade

transactions, so that the demand for Indonesian

products to be shipped abroad is increasing.

Therefore, the deficit trade balance condition is

expected to turn into a surplus.

5 CONCLUSIONS

Implementation of the AEC policy came into force in

early 2016 in all ASEAN member countries.

However, to know whether before and after the

implementation of the AEC affects international trade

in ASEAN, especially in the international trade of

Indonesia for the oil and gas and non oil and gas

sectors, a statistical test of total data on the realization

of exports and imports of Indonesian trade to

countries in the ASEAN region when before and after

the AEC was enacted using the Wilcoxon Test. Using

a 95% confidence level, the results of the study

indicate that the total value of Indonesia's exports and

imports of oil and gas and non-oil and gas sectors to

ASEAN countries before and after the AEC is the

ACIR 2018 - Airlangga Conference on International Relations

same or there is no statistically significant difference.

Thus, the AEC has no effect on Indonesia's

international trade to ASEAN countries. Although the

results of this data analysis are said to be valid

because using statistical methods, further research

needs to be done to develop the results of existing

research, especially to further examine the factors

causing international trade in Indonesia in AEC is not

optimal.

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Analysis of ASEAN Economy Community Implementation in Indonesia International Trade to ASEAN Countries