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AseanCaring“ASEAN officials have repeatedly emphasized the importance of SMEs, as the backbone of the regional economy. The process of regional economic integration is expected to encourage SMEs to upgrade their capabilities and narrow the development gap among ASEAN economies. As a result, ASEAN countries are committed to both implementing the AEC Blueprint for easing tariff and non-tariff barriers, and to monitoring the process based on statistical measures.”

However, the reality is much more complex than scorecard numbers. The first problem is the lack of public awareness of the AEC’s opportunities and challenges. Although there is a growing familiarity with the terms ASEAN and AEC, most SMEs still do not know what to expect and anticipate. This is largely a reflection of a lack of interest in learning more about other ASEAN countries or expanding market overseas. This fact is certainly worrying: SMEs account for more than 97 percent of the Indonesian workforce, but their total contribution to Indonesia’s non-oil and gas exports has been gradually declining, from 20.15 percent in 2003 to 16 percent in 2014.

Second, although Indonesia has enjoyed steady development for more than a decade, the World Competitiveness Index 2014-2015 Report notes that a lack of skilled human resources, poor infrastructure facilities, and weak technological knowledge persist as serious problems for the Indonesian economy. This has implications for the SME sector, especially in the form of limited banking and transportation access, a lack of knowledge about ASEAN product standardization and export-import procedures, as well as insufficient technical understanding. Although Jakarta has confirmed 90.5 percent of the AEC blueprint, some major discrepancies remain between the harmonization policies adopted and the ability of SMEs to tap into the system and take advantage of it.

The third problem is the inadequacy of the existing AEC preparation. Although there have been some important regulations associated with SME and AEC preparation, as well as several commitments made at the local and national levels, inter-agency coordination of ideas and policies has been poor. As such, some local governments are still confused about the central-local coordination mechanism and unsure of the framework of the AEC.


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