Gains from open international trade and investment in the deregulation era : implications for Indonesia"s international economic policy in the 21st century

Significant trade liberalization began in 1986 and continued until the currency and financial crisis hit in 1997. Parallel to trade reform were reforms in the treatment of foreign investment, with ownership restrictions all but eliminated by 1995. This paper examines the deregulation experience and performance of the economy during the pre-crisis, crisis, and post-crisis periods. The evidence suggests that deregulation was and is a success. Preparation for increased global and domestic competition will require ongoing efforts to keep the pace of reform brisk. Indonesia will also need to develop its human and institutional capacities to manage its international economic relations and meet its domestic challenges in the 21st century. In particular, market access issues will be high on the agenda of international negotiations. Obstacles in the form of contingent protection, rising discriminatory regionalism, and domestic decentralization will heighten the urgency of building capacities in the areas of regulatory impact assessment, international trade law and economics, and analytical research in support of negotiating positions. (Author abstract)