Abstract
This paper attempts to assess the role of FTA (Free Trade Agreement) in enhancing both the trade and investment in both levels of the country and the region. This paper chooses Indonesia as the country and five ASEAN member states (Indonesia, Malaysia, Thailand, Philippines, and Vietnam) as the regional case of study. This paper uses net export and FDI inflows as the dependent variables for trade and investment respectively. Period of analysis is 25 years from 1992 to 2016. This paper found that FTA utilization is effective to increase trade and investment at both the country and regional level with certain control variables. It found that ASEAN is ready to move from intra-regional trade to intra-regional investment. Therefore, the ASEAN Economic Community is on the right track and in the right time for ASEAN. At the bilateral level, this study proposed that the net export surplus is the aim for the negotiation to the lower income per capita trading partner while FDI inflow from the trading partner is the aim for the higher income one. From non-regression model, this paper found that the role of FTA center is necessary to optimize the utilization of FTA.
