ASEAN EC Reduces Service Balance Deficit

Website: http://bankkarir.blogspot.com
The opening of five service sectors within the ASEAN Economic Community (AEC) is expected to reduce Indonesia's service balance deficit. Bambang P.S. Brodjonegoro, Head of the Fiscal Policy Agency at the Finance Ministry, said that tourism is the most promising service sector for Indonesia.

The opening of the free trade sectors will be in stages according to the readiness of each country. The five sectors that have agreed include tourism, health, air transportation, logistics and e-commerce. Meanwhile, professions that have agreed to the liberalization include physicians, dentists, nurses, accountants and engineers.

Based on data from Bank Indonesia, the service balance had a US$ 2.8 billion deficit in the fourth quarter of 2010, an increase compared to US$ 2.3 billion a quarter earlier. This was the result of the additional deficit of the travel service, following hajj spending and payment of royalties and license fees of several automotive companies. It reached US$ 2.18 billion in the first quarter of 2011.

The tourism sector suffered a US$ 200 million deficit in the fourth quarter of 2010. State revenue from tourist visits grew only by US$ 100 million to US$ 1.9 billion, although the number of tourists climbed from 1.9 million to two million. Meanwhile, foreign tourists decreased from 1.7 million to 1.6 million.

The service balance deficit will climb to US$ 11.7 billion-US$ 10.8 billion in 2011 from US$ 9.5 billion in 2010, said Bank Indonesia. Hatta Rajasa, Coordinating Minister for Economic Affairs, said that the opening of service trade sectors will be advantageous if the government is able to manage the business opportunity. The government requires special preparations for optimum results.

Ninasapti Triaswari, an economist of Indonesia University, said that the liberalization of the service trade will have positive and negative repercussions. One of the positive effects is the improvement of competitiveness in the local service industry.

Indonesia also requires a large amount of investments to reduce the service balance deficit. This is caused more by the finance and manpower sectors. The country is able to send thousands for manpower but they lack skill so the wage is relatively small. Other countries, on the contrary, are only able to send about one to two workers to Indonesia with a substantial salary. "The salary of one expatriate is similar to that of 100 local workers," she said.

Establish a Standard

Ninasapti added that free trade implementation in the service sector will have a negative effect if Indonesia does not improve its competitiveness. The county will only be the market for other countries and will face difficulties in selling services, including tourism, which is one of the leading sectors. Indonesia, therefore, needs to establish a special standard for every sector.

Mari Elka Pangestu, Trade Minister, said that in order to work in the ASEAN countries, professionals must fulfill ASEAN standards and hold a valid certificate.