In the early 1990’s Indonesia was one of the few countries spread through out the world without any major trade integration or ties. Her imported goods came from near markets such as Singapore and the Asia newly industrializing economies (NIEs). The growth of Indonesia manufacturing industries contributed to the growth of export markets. Japan provided the greatest market of oil and liquefied gases. Among the oldest Indonesia trade integration was the ASEAN, (Library of congress 1992).
ASEAN
It was formed in 1967 to foster economic integration among Indonesia, Thailand, Singapore, Malaysia and Philippines, Brunei joined later. The first agreement was the industrial project agreement signed in 1976. The objectives of this agreement were to enhance establishment of joint large scale industrial projects by the member states.
In 1981 there was the establishment of industrial complementation scheme which was designed to coordinate the manufacture of components such as vehicles among the member states. In 1992 a major trade accord was signed which saw the birth of ASEAN Free Trade Area (AFTA) in 1993. This was as a result of the plan to reduce trade tariffs for manufactured good to 5 percent by 2008.
An AFTA objective is to increase trade among member states by reducing trade barriers. It is also meant to help eliminate non trade barriers. AFTA has enabled member countries to promote bilateral trade; it has increased the foreign exchange volume between the member states. AFTA has led to a more open economy to the member states.
Asia Pacific Economic cooperation (APEC)
This is a forum that was formed to facilitate economic growth and Trade Corporation in states of Asian- pacific region. APEC was founded in 1989. Since its formation it enhanced reduction of tariffs and other trade barriers among member states. This has led to increased trade among the members through increased exports. This has seen the growth and efficiency of domestic economies of the member states.
Through the APEC investment facilitation action plan (IFAP) Indonesia has been able to cooperate with other member states in joint investment activities which have seen the growth of its manufacturing industries. Indonesia companies have been able to spread their investment in other member states which has resulted to increased gross domestic income. This cooperation has also seen to multilateral investment between Indonesia and other members of APEC. The APEC agreement has provided Indonesia with great opportunities for international trade. Indonesia to increase its export earnings forms these manufacturing industries (APEC, 2009).
World Trade Organization (WTO)
This is a global organization that deals with trade relationship and rules between states. Indonesia is member state to WTO. This organization commands a lot of respect in the global trade arena and facilitates trade among member states. It produces reports and coordinates trade among member states. It is also responsible for settling trade disputes among member states (WTO, 2009).
The world trade organization implements its rules through sanctions making it the most powerful trade organization in the world. Indonesia being a member is no exceptional to this, through the WTO Indonesia has been forced to honor trade agreement making it liberalize its market. The WTO rules and regulation has forced Indonesia to change from its protectionist policies to a more open economy. This organization has also helped Indonesia to solve her economic crisis during the Asian Financial Crisis and regain a good economic position.
Bilateral energy cooperation between Indonesia and Netherlands (BECIN)
This is a bilateral corporation between Indonesia and Netherlands in energy production and development. It is developed through the flame work of Indonesia-Netherlands Energy Working Group (EWG). The aim of BECIN is strengthening institutional capacity for energy planning. BECIN is responsible for supporting the strategy for development of non renewable energies in the two countries.
Through this program the two countries have developed joint energy policies, to follow, in order for them be energy secure. The Indonesia companies and their counterparts from Netherlands have engaged in joint energy ventures that has increased energy production in the two countries.
Indonesia and Netherlands through this program have come up with joint training activities for human resources. This is to provide them with man power in the energy sector that is needed in energy production and conservation. The two countries have come up with research facilities for geothermal and non-renewable sources of energy.
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Globalization
Indonesia had benefited from elements of globalization prior to the financial crisis in 1997. It had made the Indonesia economy to grow tremendously and poverty levels to decline by about 60 percent, but in 1997 the negative impacts were felt and hit hard on the Indonesian economy.
The Asian financial crisis hit Indonesia at a great speed ruining Indonesia economy. This resulted to rampant unemployment, poverty levels soared up and the national debt rose at staggering heights. This financial crunch was attributed to inadequacies in the international financial systems. The Asian financial crisis was caused by system failure at the global level. There was lack of good governance in the international monetary system.
This crisis affected most of Indonesia economic systems leading to reduction of its trade potential. It also reduced its export earnings. The growing manufacturing sector was hard hit leading to closure of some major industries. (Economy watch 2009)
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