To recap, the objective of the AEC is to improve economic stability in Southeast Asia, to address economic matters among Asean member countries and to improve ASEAN competitiveness and enable members to compete with China and India in attracting foreign investment.

The AEC is expected to create an integrated market for capital, goods and service as well as labor. The impact of this will be a free flow of goods and services, investment, credit and skilled workers among ASEAN countries. Another positive impact is that Indonesian investors may expand their businesses without facing restrictions in neighboring countries. Conversely, Indonesia can draw investment fromAsean investors.

The government of Indonesia has issued Presidential Instruction (Inpres) No. 11/2011 on the implementation of the AEC blueprint in preparing Asean free trade. The blueprint mentions twelve priority industries to be integrated by the government, namely agribusiness, automotives, electronics, fisheries, rubber products, wood products and textiles.

The remaining five come from the services sector, comprising air transportation, health, tourism, logistics and information technology. In the AEC era, these industries will be integrated to allow for a free flow of goods, services, investment and labor.

According to the Industry Ministry, Indonesia currently has nine industries where the country can excel in theAsean market, namely agro-based businesses (CPO, cacao and rubber), fish and fish products, textiles and textile products, footwear, leather and leather products, furniture, foods and beverages, fertilizers and petrochemicals, machinery, base metals, iron and steel.

Other industries, like manufacturing and tourism, are yet to be developed to reach their full potential. Indonesia will have to retain its position as market leader in several industries to lure prospective investors.

So far, five main measures have been taken by the government to prepare for the AEC. First, the Aku Cinta Indonesia (I love Indonesia) programme as a national branding campaign for the consumption of domestic products such as garments, accessories, entertainment, tourism etc.

Second, the strengthening of the micro, small and medium enterprises (MSMEs) segment. Entrepreneurial activity in the segment is buoyed by promoting ambition, production efficiency and effective management, supporting market absorption of local MSMEs products as well as creating conducive business conditions.

Third, capacity and quality improvements of infrastructure like land, sea and air transportation, communication and information systems and energy supply. Fourth, the improvement of human resources through education. Lastly, organisational and administrative reform as stipulated in the 2012-2025 national strategy to prevent and eradicate corruption.

To help MSMEs with capital, the Financial Services Authority (OJK) can apply preferential treatment not only by giving subsidies but also through a more flexible approach to non-performing loans (NPL). The government should also facilitate entrepreneurial activity entering the domestic market by providing vocational and training centers and by connecting entrepreneurial activities in one region with those in other areas for information exchange.

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