GTAP Resources: Resource Display
| GTAP Resource #851 |
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"How Will the Regional Free Trade Agreements Shape the Indonesian Economy? Evaluation by the Computable General Equilibrium Model" by Tsutsumi, Masahiko Abstract This paper examines Indonesia's FTA strategies by numerical experiments by the CGE model. Following lessons are provided: 1. Indonesia can expand its potential GDP growth path by joining to various regional FTAs. However, simulation results under different assumptions indicate that Indonesia may shrink output by AFTA due to slower capital accumulation. Therefore, the type of liberalization and applied sectors matter for future growth. 2. FTAs tend to reveal the comparative advantages based on endowments; (1) Plausible scenarios, i.e. Japan-Korea-Singapore FTAs: Indonesia’s natural resource intensive sectors, i.e. agriculture (AGR), mining (MNG), and wood products and papers (W_P) expand, so that manufacturing sectors have no way to be boosted. (2) North Pacific Alliance, i.e. plausible plus NAFTA: AGR loses its comparative advantage and release endowment. Therefore, manufacturing sectors, in addition to MNG and W_P, expand albeit a small extent. (3) Emerging China, i.e. plausible plus China and/or NAFTA: textile and apparel (TXL) and other manufacturing (OMF) are negatively affected through China’s entrance to the world largest FTAs. Released labor and capital flow into other manufacturing sectors and services. In general, China’s effects are pro-industrialization in Indonesia. (4) Indonesia’s liberalization (AFTA, APEC, and others): as a whole, the primary industry declines while the secondary industry; especially capital-intensive manufacturing sectors expand. However, AFTA and APEC create completely different specialization among manufacturing sectors. 3. A choice of partners seriously affects both the industrial structure and the size of capital accumulation in the future. Although the exercise here is not comprehensive or precise enough to discuss the concrete set of industrial and trade policy, it sheds the light on what Indonesian government should take seriously. |
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Public Access  GTAP Resource 851 (1.2 MB) Replicated: 0 time(s)Restricted Access No documents have been attached. Special Instructions No instruction supplied |
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Last Modified: 9/15/2023 2:05:45 PM
