Why (most) Indonesian businesses fear the ASEAN Economic Community: struggling with Southeast Asia’s regional corporatism

Abstract

By the end of 2015 the Association of Southeast Asian Nations (ASEAN) had ushered in a common market, the ASEAN Economic Community (AEC). However, the groups most affected by it – small businesses – were bypassed in the decision-making process. They are the victims of a selectively inclusive state corporatism which member countries have transferred from their domestic political system to the regional level. In this article I argue that the decision to create the AEC was promoted by ASEAN governments together with foreign economic and local corporate interests. This coalition was able to frame the AEC in a way that small businesses perceived it as a win-win scheme. Empirically the article focuses on Indonesia.

Keywords:

• ASEAN
• regionalism
• Indonesia
• business associations
• micro, small and medium enterprises (MSMEs)

Notes

1. McClanahan et al., Taking Advantage of ASEAN Free Trade Agreements, 27.

2. Jakarta Post, June 5, 2013, May 7, 2014, November 3, 2014; and Antara, October 24, 2014.

3. Rüland, “The Limits of Democratizing Interest Representation.”

4. The typology draws from previous research on corporatism, in particular, Schmitter, “Still the Century of Corporatism?”; Malloy, “Authoritarianism and Corporatism in Latin America”; Schmitter and Lehmbruch, Trends towards Corporatist Intermediation; and Wiarda, Corporatism and Comparative Politics.

5. Cohen and Uphoff, “Participation’s Place in Rural Development,” 231–235.

6. Kraft-Kasack, “Transnational Parliamentary Assemblies.”

7. Cohen and Uphoff, “Participation’s Place in Rural Development.”

8. Rüland, “The Limits of Democratizing Interest Representation.”

9. Young, “The Foreign Capital Issue,” 690; Chng, “The Private Sector,” 58; Urgel, The ASEAN Chambers of Commerce and Industry, 24; Yoshimatsu, “Regional Integration and Business Interests,” 232; and Collins, “A People-oriented ASEAN,” 315.

10. Rüland, “The Limits of Democratizing Interest Representation.”

11. Urgel, The ASEAN Chambers of Commerce and Industry, 24.

12. Ibid., 41.

13. Ibid.

14. Interview information, March 5, 2010. See Young, “The Foreign Capital Issue”; and Yoshimatsu, “Preferences, Interests, and Regional Integration,” 129.

15. ASEAN Chamber of Commerce and Industries, ASEAN; Anwar, Indonesia in ASEAN; and Yoshimatsu, “Regional Integration and Business Interests,” 233.

16. Bowles and MacLean, “Understanding Trade Bloc Formation,” 339; Yoshimatsu, “The Challenge of Globalization,” 42; Collins, “A People-oriented ASEAN,” 315; and Chandra, Civil Society in Search of an Alternative Regionalism, 5.

17. Interview information, March 1, 2010.

18. Yoshimatsu, “The Challenge of Globalization.”

19. Bowles and MacLean, “Understanding Trade Bloc Formation,” 339.

20. Straits Times, May 29, 1992.

21. Xinhua News Agency, April 10, 1998.

22. See also statements in this respect by Enoch Fang, a Singaporean government official at the time, ASEAN-CCI was formed. Straits Times, April 25, 1972.

23. See ASEAN Secretariat, “Private Sector Participation,” http://www.aseansec.org/9271.htm, accessed September 12, 2010; and interview information, March 23, 2010.

24. Interview information, March 5, 2010.

25. Business Times, September 26, 1994.

26. Urgel, The ASEAN Chambers of Commerce and Industry, 92. See also Mengenal Asosiasi Pengusaha Ritel Indonesia (APRINDO), “Latar Belakang Sejarah Berdirinya Aprindo”, http://www.aprindo.net/tentang_kami_154.html, accessed March 22, 2015.

27. Yoshimatsu, “Regional Integration and Business Interests,” 235.

28. Rüland, “ASEAN and the Asian Crisis.”

29. Asia Times, August 17, 2004.

30. Jakarta Post, August 7, 2003; and interview information, March 5, 2010. See also Yoshimatsu, “The Challenge of Globalization,” 42.

31. Collins, Building a People-oriented Security Community; Gerard, ASEAN’s Engagement of Civil Society; and Rüland, “The Limits of Democratizing Interest Representation.”

32. Interview information, March 23, 2010; and “ASEAN Business Advisory Council (ASEAN-BAC) to hold First Meeting in Mid-April,” http://www.aseansec.org/14607.htm, accessed September 12, 2010.

33. Interview information, March 23, 2010.

34. Interview information, March 5 and 23, 2010; and Jakarta Post, May 26, 2010.

35. Interview information, September 22, 2014.

36. For details, see ASEAN-BAC members, http://www.asean-bac.org/members.html, accessed April 12, 2015.

37. Jakarta Post, May 10, 2010.

38. Jakarta Post, September 19, 2013.

39. Interview information, March 23, 2010.

40. Interview information, March 5, 2010 and March 3, 2015. See also Yoshimatsu, “Regional Integration and Business Interests,” 236.

41. Joint Media Statement of the 41st ASEAN Economic Ministers’ Meeting, Bangkok, August 13–14, 2009.

42. Interview information, March 23, 2010.

43. Collins, Building a People-oriented Security Community; Gerard, ASEAN’s Engagement of Civil Society; and Rüland, “The Limits of Democratizing Interest Representation.” Thai News Service, March 5, 2009.

44. Interview information, March 5, 2010.

45. Philippine Daily Inquirer, November 19, 2006; and interview information, March 23, 2010.

46. Speech by Dr. Surin Pitsuwan, Secretary-General of ASEAN, at the Launch of the ASEAN Business Club (emphasis added), http://www.asean.org/resources/2012-02-10-08-47-56/speeches-statements-of-the-former-secretaries-general-of-asean/item/speech-by-dr-surin-pitsuwan-secretary-general-of-asean-at-the-launch-of-the-asean-business-clubs-abc, accessed May 6, 2013.

47. Interview information, March 12, 2010.

48. Interestingly the EPG consulted ASEAN-CCI and not ASEAN BAC. ASEAN-CCI seems to have mentioned SME interests in its talks with the EPG in Bali in April 2006 but obviously without much success. Keynote address by President S. R. Nathan at the ASEAN-CCI Gala Dinner held in conjunction with the handover of the ASEAN-CCI presidency from Singapore to Thailand, Ritz Carlton Millennia Singapore, August 13, 2006. http://www.istana.gov.sg/News/Keynote+Address+by+President+S+R+Nathan+at+the+Asean-CCI+Gala+Dinner+held+in+conjunction+with+the+Ha.htm.

49. New Straits Times, November 1, 2014.

50. Manila Times, April 24, 2013.

51. ASEAN Strategic Action Plan for SME Development, 2010–2015, “Mission and Objective,” 4. http://www.aseansec.org/SME/SPOA-SME.pdf, January 31, 2016.

52. Jakarta Post, May 14, 2014.

53. Interview information, March 9, 2015; Malaysia Economic News, August 22, 2006; and Cambodian Business Review, December 31, 2014.

54. Interview information, September 22, 2014; “Business in the Dark on ASEAN Community,” March 7, 2015, http://aseantuc.org/2015/03/732015-business-in-the-dark-on-asean-community/.

55. See, for instance, Wahyu Susilo, quoted in Media Indonesia, April 28, 2011; and the decidedly anti-liberal manifest “Deklarasi Rakyat Membangun Regionalisme Yang Berdaulat Bongkar dan Lawan Dominasi Kapitalisme Global,” November 18, 2011, ditulis oleh WALHI, http://walhi.or.id/ruang-media/siaran-pers/1675-deklarasi-rakyat-membangun-regionalisme-yang-berdaulat-bongkar-dan-lawan-dominasi-kapitalisme-global.html.

56. Interview information, March 26, 2010.

57. See the KADIN Homepage, http://www.bsd-kadin.org/about/kadin, accessed March 13, 2015; and Jakarta Globe, June 17, 2010.

58. Interview information, March 9, 2015.

59. Ziv, “Populist Perceptions and Perceptions of Populism”; Rüland, “The Limits of Democratizing Interest Representation”; and Bourchier, Illiberal Democracy in Indonesia.

60. Jakarta Post, March 16, 2005; and “Rapat Pimpinan Nasional (RAPIMNAS) 2014 KADIN Indonesia,” BSD Bulletin, January 14, 2015, http://www.bsd.kadin.org/news/bulletin-detail/id/64, accessed March 3, 2015.

61. Interview information, March 9, 2010; and Jakarta Post, January 12, 2011.

62. See, for instance, “Rapat Pimpinan Nasional (RAPIMNAS) 2014 KADIN Indonesia,” BSD Bulletin, January 14, 2015, http://www.bsd-kadin.org/news/bulletin-detail/id/64; Jakarta Post, December 1, 2005 and September 24, 2009; and interview information, March 3, 2015.

63. Jakarta Post, September 22, 2004, September 24, 2004 and November 18, 2009.

64. Jakarta Post, January 21, 2010.

65. Kabar Bisnis, May 24, 2013.

66. Merdeka, May 26, 2013. For a similar statement, see KADIN Jakarta chairman Eddy Kuntadi. See Antara, October 24, 2014. This also included charges by APINDO and HIPMI that the government does not socialise AEC enough. Antara, June 26, 2013.

67. Interview information, March 9, 2015.

68. Kabar Bisnis, January 4, 2010.

69. “Indonesia Trade and Investment News 8/13,” BSD Bulletin, August 28, 2013, http://www.bsd.kadin.org/news/bulletin-detail/id/37.

70. Jakarta Post, August 19, 2014; and interview information, September 10, 2014.

71. Interview information, March 6, 2015; and “Foreign Policy Breakfast, Cara Kemlu Libatkan Stakeholders di Diplomasi Ekonomi,” http://www.kadin-indonesia.or.id/berita/ketuaumum/2015/01/323547635423/Foreign-Policy-Breakfast-Cara-Kemlu-Libatkan-Stakeholders-di-Diplomasi-Ekonomi, accessed March 6, 2015.

72. Survey results corroborate that ASEAN-wide and in Indonesia only a minor percentage of larger firms and those with foreign equity make use of FTA incentives. The Nation, June 24, 2013; “Indonesia Trade and Investment News 4/14”, BSD Bulletin, April 21, 2014; and “Impact of FTAs Implementation in Indonesia”, http://www.bsd-kadin.org/news/bulletin-detail/id/51, accessed March 3, 2015. On the collusion between export-oriented conglomerates and government technocrats, see also Jones, “Explaining the Failure of the ASEAN Economic Community.”

73. See inter alia, Jakarta Globe, June 17, 2010.

74. “Chamber of Commerce: Asean Free Trade not a Threat, but Great Opportunities,” Berita Satu, May 24, 2013, http:/www.beritasatu.com/ekonomi/115758-kadin-pasar-bebas-bukan-ancaman-tetapi-peluang-besar.html, accessed March 3, 2015; Antara, June 4, 2013; Republika, October 25, 2014; and “Minister of Trade and Industry of Singapore visits the Indonesian Chamber of Commerce,” http://www.kadin-indonesia.or.id/berita/ketuaumum/2014/11/368491615421/Menteri-Perdagangan-dan Perindustrian-Singapura-Kunjungi-Kadin-Indonesia, accessed March 6, 2015.

75. Rüland, “Constructing Regionalism Domestically.”

76. For a straightforward statement in this respect, see John A. Prasetio, a senior executive of KADIN, quoted in the Jakarta Post, August 24, 2006.

77. Jakarta Post, November 3, 2014.

78. Gatra, February 26, 2001 and September 24, 2001; and Jakarta Post, December 20, 2001 and January 2, 2003.

79. Jakarta Post, April 6, 2010, 13.

80. Jakarta Globe, April 5, 2010.

81. Interview information, March 9, 2015. Also proposing renegotiation was former Coordinating Minister for Economic Affairs, Rizal Ramli. See Riau Bisnis, March 3, 2014.

82. “DPR Akan Upayakan Penguatan Kadin,” October 7, 2014, http://www.kadin-indonesia.or.id/berita/ketuaumum/2014/10/293278165412/DPR-Akan-Upayakan-Pengatuan-Kadin; Jakarta Post, February 27, 2001 and November 12, 2009; ASEAN Affairs, November 13, 2009; and Kabar Bisnis, January 4, 2010.

83. See also Jakarta Post, June 26, 2010.

84. Interview information, March 3 and 9, 2015.

85. KADIN, “SBS Bicara Tentang ACFTA dan Dunia Usaha Daerah,” November 14, 2010, http://www.kadin-indonesia.or.id/berita/kadinpusat/2010/11/315244345419/SBS-Bicara-Tentang-ACFTA-dan-Dunia-Usaha-Daerah; Jakarta Post, January 2 and March 5, 2010; Jakarta Globe, January 6, 2010; Kabar Bisnis, May 18, 2011; and KADIN, “SBS Bicara Tentang ACFTA dan Dunia Usaha Daerah,” November 14, 2010, http://www.kadin-indonesia.or.id/berita/kadinpusat/2010/11/315244345419/SBS-Bicara-Tentang-ACFTA-dan-Dunia-Usaha-Daerah. See also Jakarta Post, September 19, 2008.

86. Merdeka, March 20, 2014.

87. “ASEAN–Indonesian Stakeholders Dialogue Forum,” BSD News, November 22, 2013. The erection of non-tariff barriers is also the objective of KADIN representatives’ calls for stronger institutional capacity for the Indonesian Anti-Dumping Committee (KADI) and the Indonesian Trade Safeguard Committee (KPPI). See the statement of legal and trade safeguarding permanent committee head Ratna Sari Loppies in the Jakarta Post, November 3, 2013, http://www.bsd-kadin.org/news/news-detail/id56, January 31, 2016.

88. Jakarta Post, October 18 and 19, 2011.

89. Lim and Kauppert, “Facing a Political Lock-in Situation.”

90. Thereby adopting an argument that ASEAN-BAC was already pursuing at a very early stage. See New Straits Times, September 23, 2003.

91. See Jakarta Post, May 20, 2010; former KADIN Chairman and then Minister of Trade, M. S. Hidayat in the Jakarta Post, October 26, 2013; and interview information, March 9, 2015.

92. Interview information, March 9, 2015. Further, KADIN President Suryo Bambang Sulisto used the argument that AEC was there to prepare ASEAN businesses for global competition. Berita Satu, May 24, 2013.

93. Jakarta Post, January 21, 2010; and Tambunan, Ongoing Trade Facilitation Improvement, 9.

94. Interview information, March 1, 2010 and March 9, 2015. A case in point is the economic roadmap that KADIN produced in cooperation with foreign chambers of commerce in Indonesia in 2005. Jakarta Post, December 1, 2005.

95. Interview information, September 2, 2014.

96. For a reference to weak research institutions, see Indonesia’s former ambassador to the WTO, Gusmardi Bustami, in the Jakarta Post, September 24, 2004.

97. Interview information, March 16, 2015.

98. Hicks, A False Start?

99. Interview information, March 13, 2015; and Jakarta Post, April 7, 2014. On the competitiveness of the larger Indonesian banks, see Jakarta Post, July 15, 2014.

100. “KADIN Indonesia–ASEAN Business Briefing,” BSD News, October 16, 2013, http://www.bsd-kadin.org/news/news-detail/id/54; and interview information, March 16, 2015.

101. detik.finance.com, October 12, 2009; and interview information, March 9, 2015.

102. The ASEAN Trade Union Congress is an alliance of Southeast Asian trade unions, but is not accredited by ASEAN.

103. Yoshimatsu, “Regional Integration and Business Interests,” 237.

104. MacIntyre, “Organising Interests.”

105. Jakarta Post, May 14, 2014.