How should Indonesia face the ASEAN Economic Community?

JAKARTA, Indonesia — What does the future hold for the world’s third largest democracy, home to the world’s largest Muslim population, as it enters an era of new political leadership? With the ASEAN Economic Community (AEC) around the corner?

The first open session of the World Economic Forum on East Asia 2015, which Jakarta is hosting from April 19-21, tackled these in a session called “The Aspirations of Inspirational Indonesia”.  (LIVE: World Economic Forum on East Asia 2015)

Democracy alone is not enough

Indonesia, according to Kishore Mahbubabi, dean of the Lee Kuaw Yew School of Public Policy, has survived the transition to a democratic country. This is a very valuable capital for the nation’s future. But is democracy enough? 

Alone, it’s not. Mahbubabi points to the importance of Indonesia opening its economy and connecting its market with the global economy.

“Even Indonesia, with 250 million people living in it, can’t grow on their own. You have to open up the economy. And the young people in Indonesia have the capability to compete with the rest of the world,” he said.  

Challenges of an open economy

But as a nation becomes an open economy, challenges rise. Hans-Paul Burkner, chairman of Boston Consulting Group Germany, and co-chair of the forum, said that opening up has a very strong domestic dimension that needs to be addressed.

He said Indonesia has two homeworks: Developing talent and supporting infrastructure.

Mahbubabi also advised Indonesia to continue working on improving the country’s competitiveness. 

“There are hundreds of indexes on competitiveness. You should move yourself up on economic competitiveness index,” he said. 

On the ASEAN Economic Community

As the ASEAN Economic Community (AEC) come into effect by the end of the year, the tide is even higher. (READ: Will Indonesia be competitive in an integrated ASEAN?)

According to Mahbubabi, the world is watching what ASEAN will do with AEC. In the process, strong trust from the market is very critical. “It’s not what the government will say or announce, but what the market believes in,” he said

“Next six months are critical. Indonesia’s role is very fundamental for the success of AEC, as the biggest economy of the region.”

One challenge according to Mahbubabi is the growing trend in economic nationalism. “It’s not yet policy, but it might go into it, which will put on brakes on the AEC,” he added.

On the other hand, Indonesia’s role is very fundamental for the success of AEC, as the biggest economy in the region.

Also a main challenge is the urgency of bringing the discourse on AEC to the grassroot level. So far, Mahbubabi said that the AEC has only been a discussion among government officials and the business elite. 

Crucial: equitable development

As nations open up their economy and generate a more connected global market than ever before, one big question remains: how to grow without leaving anyone behind?

This is a major component that many people forget, Mahbubabi said: Equitable economic development. 

Data from Thomas Piketty quoted by Mahbubabi shows how the gap between the rich and poor is growing larger: From 3 to 1 in 1820 to 80 to 1 in 2014. History also shows this can be reduced by revolution or war – things we need to avoid.

As ASEAN moves forward to a more open region economically, countries have to put their focus on equitable economic development. – Rappler.com