Open AccessThe Impacts of Indian Ocean Rim Association (IORA) Economic Integration on Indonesian Macro and Sectoral Economy
Author(s) -
Nur Kardina Massijaya,
Widyastutik Na,
Tanti Novianti
Publication year - 2019
Publication title -
international journal of scientific research in science, engineering and technology
Language(s) - English
Resource type - Journals
eISSN - 2395-1990
pISSN - 2394-4099
DOI - 10.32628/ijsrset196140
Subject(s) - indonesian , tariff , balance of trade , economics , welfare , international economics , macro , economic integration , international trade , economy , market economy , philosophy , linguistics , computer science , programming language
Economic cooperation among countries aims primarily to eliminate trade barriers, including Indian Ocean Rim Association (IORA) with 21 participating members. This study is designed to examine impacts of Indian Ocean Rim Association (IORA) economic integration would have on Indonesian economy. The analysis employs the Global Trade Analysis and Policy (GTAP) model and simulates four tariff elimination scenarios. Within the analysis it has been noticed that relatively bigger tariff reduction delivers higher increase in Indonesian welfare and GDP growth. However, the overall gain has dampened due the presence of deficit in trade balance, except in simulation where 95% tariff reduction applies only on request-offer sectors. Only three sectors show consistently high competitiveness under IORA framework with increasing output and export numbers, and other sectors demand for imports remains high. All in all, the result confirm that IORA is beneficial for Indonesia in terms of welfare and growth of real GDP. On the other hand, increasing demand for imports exceeds its exports, which will lead to huge deficit in trade balance.