Free trade agreement between ASEAN and China have been executed early in 2010. Various types of trade tariffs have been removed / lowered to support the agreement and will affect the industry in Indonesia and led to changes in the welfare of households as owners of factors of production.

This research will try to find out the impact of ASEAN-China free trade on the welfare of households in Indonesia. Household will be divided into four groups, namely the poor households in urban and rural areas and non poor households in urban and rural areas. In addition, some macro impacts such as economic growth, unemployment and government budget will be analyzed to try to give an overview of the economy after the enactment of this free trade agreement. Research model that will be used in order to answer the various purposes of this research is named General Equilibrium Model AGEFIS owned by the Department of Finance of the Republic of Indonesia. This model has the advantage of fiscal instruments in the simulation consistent with the objectives of this research. The data that will be used in this research is 2005 Social Accounting Matrix (SAM) of Indonesia  2005. This research using AGEFIS CGE model, shows the level of economic changes that better than not involved in free trade zones and ACFTA AFTA. Macro indicators and output and exports showed a good level of percentage change and stimulate the economy to higher ground. Household welfare is viewed from the income of households in urban areas are still leaning on households who work in the sector rather than agriculture. For the factors of production, well-educated workforce than the positive benefits of uneducated workers. This is a recommendation for the government to improve education and training systems for unskilled labor force.

 

Discussant: Prof. Nen Amran