NAVIGATING REGIONAL COMPETITION: THE COMPETITIVENESS OF INDONESIA’S MSMES IN THE ASEAN MARKET

Abstract

The establishment of the ASEAN Economic Community (AEC) marks a significant milestone in Southeast Asia’s regional integration efforts, driving economic liberalization, free trade, and cross-border investment flows. Within this dynamic regional environment, Indonesia’s Micro, Small, and Medium Enterprises (MSMEs)—which serve as the backbone of the national economy—face both vast opportunities and complex challenges. This study explores how ASEAN’s economic liberalization has opened new market access, strengthened technological collaboration, and fostered cross-border investment linkages, while simultaneously intensifying competition among enterprises across member states. Using liberalism theory in international relations as an analytical framework, this research argues that ASEAN’s economic interdependence produces a dual effect: on one hand, it enhances growth potential through cooperation, but on the other, it exposes structural weaknesses among MSMEs that lack competitiveness. Furthermore, this study examines the institutional role of ASEAN, particularly in enhancing MSME competitiveness through policy harmonization, capacity building, and digital transformation initiatives. Through mechanisms such as best-practice sharing and policy benchmarking, ASEAN institutions contribute to narrowing development gaps among member states and supporting inclusive regional growth. The findings highlight that the competitiveness of Indonesia’s MSMEs in the ASEAN market is determined not only by domestic innovation and efficiency but also by the collective institutional strength of ASEAN in promoting a balanced, open, and cooperative regional economy.