The problem is alot of things needed only make fiscal sense if you can make it in such bulk that the cost vs selling price is worth the effort. Unfortunately that usually means exports.
Market protection is needed. This was also happening during Soeharto period. After WTO deal is signed by almost all nations in late 1990's, the protection is still implemented at 20 % as this rate is still eligible according to WTO.
Country with large population is already big market that can entice FDI to come and this is something that needs to be capitalized.
FTA and Comparative Advantage
Indonesia did signed FTA with China in middle of 2000 which is actually ASEAN-China FTA. This measure is conducted because of market liberalism has become the trend during early 2000, other countries are also doing the same like Pakistan, Bangladesh, etc.
On the implementation side, market liberalism will not benefit countries that dont have focus on their economic development like countries with large defense budget compared to their GDP. Market liberalism should be followed by lot of institution and law reform and infrastructure development to make the country competitive. Market liberalism will make the economy gets competitive but there should be conditions being implemented to make the market become more competitve, in this aspec the country government play big role.
The basis of the FTA is comparative advantage. Does Pakistan define its comparative advantage compared to China ?
For Indonesia we have several comparative advantage like :
1. Affordable energy prices
2. Major producers of nickel, bauxit, tin, copper = Followed up by export ban
3. Big population
4. Long coastline = Many industries can be set up there and sea transport is still the most efficient means for large cargo transportation
5. Mature Democracy, Political Stability
The government also try to make the country gets more competitive by
1. Improving infrastructure
2. Institution Reform ( Increase salary by performance system)
3. Reform state owned enterprises which assets is bigger than half of GDP (2021)
4. Financial Reform (The formation of OJK, increase capital on bank, limiting bank owner to lend money to their own group, reforming SOE banks which are the largest banks in the country)
5. Improve ease of doing business (Making Omnibus Law, digitalization, etc)
6. Anti-Corruption Campaign
7. Etc
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To achieve those thing, our leaders try to improve harmony among political powers and only spend defense spending lower than 1 % of GDP for decades
Indonesia also start building ASEAN and let go its invading mentality, make the region become peaceful
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For Pakistan for example, it is a producer of textile raw material, but Pakistan is not clever to manage it. Pakistan should become the next China in term of this textile industry since it has the raw material.
Pakistan can start from this textile industry. Next stage Pakistan can try to make textile machinery as the industries are already large. Of course high tarrif needs to be implemented to kick start it