Concepts and Cases
Edited by Joseph Mark S. Munoz
Chapter 16: Microenterprise in a Free Trade Era: The Case of Indonesia
Tulus T.H.Tambunan INTRODUCTION The world trade system has undergone fundamental changes towards a free trade era since the establishment of the World Trade Organization in 1994, and the process has been accelerated by many multilateral and bilateral free trade agreements among countries in many parts of the world. In Southeast Asia, since the implementation of ASEAN Free Trade Area (AFTA), the region has become a free trade area leading to significantly increased intra-trade volumes among countries in the region or members of the Association of South East Asian Nations (ASEAN), that is, Indonesia, Singapore, Malaysia, Thailand, Lao PDR, Cambodia, Vietnam, Brunei Darussalam, the Philippines, and Myanmar. In Indonesia, the trade regime has undergone significant changes from an inward-looking policy (that is, protectionism) towards an outward-looking policy (that is, open economy or trade liberalization) by reducing tariffs and removing nontariff barriers on imports and exports. Recently there have been debates concerning the survival chances of micro, small, and medium enterprises (MSMEs) in developing countries in the light of world trade liberalization. Some contributors to the debate are rather skeptical, given that most of these enterprises, especially microenterprises (MIEs), lack necessary resources for gaining competitiveness such as technology and skills. They believe that in the long run, as world trade becomes further liberalized, these enterprises will disappear. Despite this ongoing debate, the likely impact of a free trade era on the existence of MIEs in Indonesia remains an under-researched area. This chapter aims to fill this gap by assessing the likely impact...
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