Informal Cross-border Trade: Case Study of Serikin

Market in Jagoi Babang (Indonesia) and Serikin

(Malaysia)

RAZZAQITAQWA RIVANDHA
12/327764/SP/24994
Faculty of Social and Political Science
Department of International Relations
Universitas Gadjah Mada
Yogyakarta
 CHAPTER 1
INTRODUCTION

A. BACKGROUND
Malaysia is one of the ASEAN country consisting of two main lands which

shares borders either land and sea borders with Indonesia. Its capital is located in the

Semenanjung part of the country which shares the sea border and the one which

shares land border is the Sarawak part. Geographically, Sarawak is located in the

northern part of Borneo Island with Kuching as its capital city. As we share borders,

Indonesia and Malaysia are neighboring each other, correspondingly we also share

similar ethnicity so that our culture, language, looks, and even body characteristics

resemble each other.

Historically, as Malaysia gained independence before Indonesia, both shared

the common sense of one of the colonized country, the sense of brotherhood and

identity. These similar situation of fate triggered them to bridge the mutual relationship

between countries. Within security terms started in 1972 through the Security

Arrangement, which then followed by the establishment of Border Committee to

undertake security issues between borders such as embezzlement, smuggling, illegal

logging, human trafficking and so on (Djiwandono, 1988). Aside from cooperation in

security terms, economic development programs should also play an important part in

the community. The emergence of this cross-border economic activity such as trading

and micro business groups establishments and investments will generate

employment, create wealth, chip in tax revenues, and also stimulate infrastructure

constructions. In advance, it will subliminally improve the living standards of both

country’s citizens who live in the border area. A bilateral sub-regional economic

cooperation between Indonesian government and Malaysia is officially existed to

accommodate and regulate economic activity that occur within both countries. Such

example is the SOSEK MALINDO (Indonesia – Malaysia Social and Economy

collaboration), which must be optimally utilized so that will give advantages for both

sides equally. Moreover, in order to implement various international and sub-regional

economic cooperation, the government must organize a coordinated and integrated

policies and development programs.

One of the active and busy place in the border is the Jagoi Babang in

Bengkayang (Indonesia) and Serikin (Malaysia) as its counterpart. This research is

intended to deliberate the challenges, issues and also the potential development

inside the aforementioned region.

The availability of formal border accessibility through land route has been an

evolving discussion and however has been shifting from security concept to the means

of obtaining welfare by initiating economic activity as well as maintaining border

security. Furthermore, the economic and sociocultural factors will of course strongly

impact the involvement of both country’s traders to establish business opportunity and

activities at the Malaysia-Indonesian borders. Cross-border trade might also stabilize

the market price of goods being sold and supplied by each country. Also an integrated

potential market growth will generate positive outcomes towards regional income

growth and an increase in the workforce which would lead to a great economic growth

and development in the border area (Niebuhr & Stiller, 2001).

Although there still no trade route and Checkpoint of Immigration and Quarantine

exists formally in the specific region mentioned earlier, Serikin developed a market

called Pasar Serikin or Serikin market which is running an informal trade activity. Pasar

Serikin is well known for the citizens in the border area to fulfill their grocery and

shopping needs. However, the Indonesian citizens who live in the sub-district of
Bengkayang (Serikin counterpart) have to cross the border when shopping purpose is

needed. Essentially both country has their own small immigration post, customs office,

police station as well as a small military camp. In the midst of this developing economy,

it is also essentially their job to maintain security. Most communities residing in the

region use small paths and trails to conduct cross-border immigration, smuggling of

various goods, and visiting relatives. According to the 1967 Basic Agreement between

Malaysia and Indonesia, it is stated that either side of immediate border region residing

communities were to be allowed to cross the border for short, non-work related

visitation. However, crossers need to hold a Border Crossing Pass (Pas Lintas Batas

or PLB). This pass permits the holder to cross international border between both

countries without official passport. With this pass, movements are limited to within 20

kilometers of the border areas.

Since cross-border trade also implicate negative impacts and illegal activities

such as human trafficking, smuggling, and other crimes, further developing systematic

cross-border security and customs, well-organized infrastructure and good trade

transaction procedure will benefit both country. In addition, involvement from both

states as little as local municipal council and inclusive community development

programs will most likely boost the effectiveness of regulations, tariffs and taxes.

SOSEK MALINDO existed as the general umbrella and the cornerstone in

implementing the regulation of economic activity in both country. But in the day to day

reality, SOSEK MALINDO has not yet shown any significant contribution in regulating

the market as we found local wisdoms that are more likely to release illegal policies

plays an important role in the activity.

 B. RESEARCH QUESTION

1. How do the Indonesian and Malaysian local government and also cross border

traders engage in addressing local issues while maintaining the relations of

social welfare and security including in depth border development between

Indonesia and Malaysia?

2. Why despite the regulations and immigration posts provided, there are still

illegal activities discovered?

OBJECTIVES

1. To explore the historical and general economic, security and political conditions

in both border district.

2. To explore the status of serikin market from Malaysian government

perspectives.

3. To explore the nature and the motives of cross border informal trader that is

currently happening in serikin.

4. To explore potential conflict that arise in the midst of the informal trade

5. To explore the intervention between both local authorities (local wisdom) to

maintain harmonic relationship between two countries and specifically the

districts.
 C. CONCEPTUAL FRAMEWORK

Informal Cross-border Trade

Rural entrepreneurship programs has been developing since 1970 in Malaysia

when the New Economic Policy was introduced by the government (Ahmad, et al

2011). With the development of business groups and trade exercises will create

wealth, contribute to tax income, and also stimulate the development of

infrastructure (Chisty & Dassie, 2000). This cross-border trade activities provide an

open door for traders to increase new markets, supply source, capital, workers and

innovation, despite the fact that this kind of opportunity is also dependent by the

level of financial improvement of both borders (Titeca, 2009). Informal cross-border

trade could be a form of system to contribute and develop the economy for the

local community in the area (Blatter, 2000). In addition, this significant activity can

assist an area to escape a fierce poverty cycle (Damon & Jeuring, 2009). On the

contrary, informal cross-border trade can also be described as trading that may

escape the government administrative framework, moreover certain tax evasion.

Such trade incorporates those which go through informal routes and maintain a

strategic distance to avoid customs controls, and also those that go through official

routes with border crossing points and customs offices yet include illegal practices,

hence attempted to fully or partly evade paying duties and charges. But again,

despite its negative effect on the formal economy which occurs through potential

losses of tax revenues and promotion of illegal trading to some extent it has a huge

impact as aforementioned for individuals involved in the trading (Leser & Moisé-

Leeman, 2009).
Regionalization

By mid 1990s, came the new regionalism as it emerged from the dissatisfaction

of the older waves of the regionalism theory and further it derives more from a range

of contemporary regional experiences not limited by only the European case (Gamble

& Payne, 1996). In the New Regionalism Approach, regionalization can be understood

by the evidence emerging from a natural tendency to form regions, or the process of

forming regions because of existing similarities between states in specific area.

However, there may be no reason to expect that regionalization will further develop

into institutional forms of regionalism and moreover chance are small that these

particular processes will lead and resulted in anything that resembles the European

Union as one for of regionalism. The increasing amount of interactions that bind not

just states, but economic activity, commercial and human transactions in a specific

geographical region proves that regionalization is occurring and it fills the region with

substance such as economic interdependence, institutional ties, political trust and

cultural belongings (Vayrynen, 2003). Further research according to Kenichi Ohmae

(1995), the power of non-state economic actors who move money and goods across

national boundaries can create new regional spaces which lead to an extent that states

have become irrelevant. Economic activity will occur where it is most conducive and

profitable, crossing national borders and jurisdictions at will and creating a new loci of

economic activity based on what the market wants.

METHODOLOGY

In further understanding the research in this paper, several approaches is

needed as methods to help us understand more about this particular issue and

support more for the arguments, research questions and the research objectives

provided before. Such approach can be done by:

1. Qualitative micro approach

Utilizing interview guidelines showing data of Indonesian and Malaysian workers

and traders who are establishing business markets in the serikin market so in

advance we can analyze and observe the indications or signs that arise in the study

area which will be explored from aspects intended: Types of goods being sold,

Trading mechanism, their motives in trading in the specific region, Both traders’

expense cost, Both traders’ income.

2. Direct face-to-face in-depth interview

In depth interviews will be done with key informants, the traders themselves to

provide useful information. This particular interviews will also be done with the

communities, community leaders, and local business leaders, local authorities. In-

depth interviews were conducted from both sides of the government and also from

the traders, and the Malaysian citizens residing in the particular area as well in order

to gather data and information regarding the particular market and the border area

itself. In-Depth interviews are one-to-one encounters in which the interviewer uses

an unstructured or semi-structured set of questions related to particular

issues/topics to guide the discussion. The object of the exercise is to explore and
uncover deep emotions, motivations and attitudes. There are some advantages of

in-depth interviews. The interviewer can devote complete attention to each research

participant, listen actively and establish good results; better sampling because

recruiting is easier when scheduling in-depth interviews and researchers need

fewer respondents to obtain the same results; useful with difficult recruiting because

its only need to accommodate one individual; it also prompts candid responses in a

private setting regarding personal and/or professional topics of discussion; fewer

distractions; quick and effective; more productive; deeper Insights; more flexible,

and quicker adaptation can be reached (Turner, 2010; Mack et.al., 2011;

Alshenqeeti, 2014).

3. Direct observation

The observation intended as another approach to further analyzing what both

countries have done, to keep intact in regulating and protecting both workers,

stakeholders and business traders inside both borders. Since both countries have

to prevent any kind of illegal activities in order to maintain security and economy

also to keep the regional stability between both countries. The observation intended

to be done in the close proximity of the Serikin town.

4. Literature research

Literature research is intended to help providing supportive information towards

gathered reports and data while also intended to provide and gather secondary data

intertwining with this research.

 D. MAIN ARGUMENTS

The goods that are being sold in Pasar Serikin mostly came from

Indonesia, in other words, we are exporting our goods to Malaysia. But on the

contrary, according to official and formal definition these border traders are not

recognized as exporters since they are selling goods without passing through

proper and official procedure that regulates exported products. Furthermore,

merchants who trades and sell goods in the market are also mostly Indonesian

citizens. Many of these merchants came from a much farther territory from the

border region such as from Pontianak and Singkawang and even from West Java

province. As these merchants are not actually citizens that live in the border region1

they have no rights to acquire and use the Border Crossing Pass (Pas Lintas Batas).

In the meantime, this economic activity in the Serikin market has been profitable for

Serikin citizens, around 300 Indonesian traders carry out their business in the

market. These merchants hire shacks provided by Malaysian citizens who live in

the market area for trading, lodging and storage purposes. Recent reports stated

that there is a huge revenue gap between Indonesian citizens and Malaysian

citizens residing in the territory. But however, most Indonesian citizen prefer to

maintain their business placement in Malaysia. Better incentives provided by

Malaysian government are one of the reasons why Indonesian citizens trades their

goods in Malaysia. It is considered safer for the Indonesian trader to trade in

Malaysia as Malaysia provide a clear trade regulations on retribution taxes for all

traders.

1
Border region is a region that is acknowledged as districts and sub-districts which have radius of 20 km from
the zero line of the border line, in this case is the Bengkayang district, Jagoi-babang and Siding Sub-district
 Because of its isolated area and the wide span of control in the border area,

low law enforcement is inevitable. The vast amount of illegal cross border activities

only gives advantages to the foreign merchants and financiers meanwhile

undermining border area socio-economic condition. Furthermore, the lack of a firm

and consistent law enforcement in addressing this particular issues could diminish

investment interest as it can hold the economic development and decrease job

opportunities for the citizens living in the border area.

THESIS FRAMEWORK

Chapter 1: Further expanding the background of the thesis

Chapter 2: Discussion on the establishment or the formation of the illegal Serikin

market and further discussion on Malaysian government

perspectives towards the status of Serikin market

Chapter 3: Discussion on answering the research question and the research

objectives as provided

Chapter 4: Conclusion, suggetions, and closing remarks

 CHAPTER 2

THE EMERGING SERIKIN MARKET

A. The Establishment and The Formation of The Illegal Serikin Market

Jagoi Babang is a border area that has close proximity to a village called the

Serikin Village. Serikin Village is located in the Malaysian side of the border. In

1992, many Indonesian villagers crossed the border solely to trade foods and

fruits and the start of the wave of Batik fabrications. As the time passed, the

Serikin Village from mouth to mouth has been famous for its ample location to

start business via trading goods.

80 Km from Kuching, Sarawak’s capital city, Malaysia. The village

shared borders with sub-district Jagoi Babang, Bengkayang district, West

Borneo Province, Indonesia. The market opens on Saturday to Sunday, and

the traders started to come on Friday then finish on Sunday afternoon. The

border area in Jagoi Babang only has a crossing post checkpoint or known as

the Pos Lintas Batas (PLB) and the checkpoint itself only allows the citizens

who reside in the border area and owns a Border Crossing Pass or the red pass

book known as the Kartu Lintas Batas. As it has been stated before, the holder

of Kartu Lintas Batas may not travel further than the Bau District of Malaysia as

it is already exceeds the travel limit of 20km from the borderline. If a person

wants to travel further to another cities, the person needs to have a legitimate

passport issued by the specific country and must pass through the official

border crossing checkpoint located in Entikong (Indonesia) – Tebedu

(Malaysia).
 The Serikin market continuous to develop after the economic crisis

around 2000 when the officially regulated border market which is located in

close proximity to the official crossing checkpoint door or known by local as

Pintu Pemeriksaan Lintas Batas (PPLB) in Entikong had been removed a bit

farther away from the PPLB area. The far distance from the PPLB made visitors

from Malaysia have to have their passport with them to enter Indonesia.

Moreover for some time, there has been found a couple unpleasant issues

regarding the market activity such as extortion from local mafias and local

merchants begun to trade foreign exchanges. These problems consequently

decrease the amount of visitors coming to the market which then made the

Serikin market to protrude as an alternative and however now as the primary

destination for Indonesian merchant to establish business there since

Malaysian visitors and consumers are feeling secure and safer to shop in their

own land rather than to travel cross-country.

The Serikin village itself is one of the promoted tourist destination in

Sarawak which in the campaign itself said that the Serikin village is a market

that sells cheap goods from Indonesia. The amount of market visitors reached

its apex near and during Eid Al-Fitr (Muslim Holy Day after Fasting Month),

Christmas and also school holiday. Through Hotels in Kuching, Serikin market

is usually included in Sarawak tour package offered to local tourists during

International events and International conferences. From kids’ toys to bridal

clothing, from local snacks to dried fishes, and kitchen utensils to musical

instruments, also Malaysian souvenirs made by Indonesian people and all

brought from Indonesia to be sold in the Market. These merchants who brought

goods from Indonesia aren’t actually resides in the border area. Many of them
 came from districts further from Jagoi Babang, such as Singkawang or the

capital city of West Borneo province, Pontianak. Even can be found a merchant

from Java Island. These merchants however should not be holding a Kartu

Lintas Batas as it violates the rule of the Kartu Lintas Batas holder.

In the meantime, Indonesian government is currently developing a

market in Jagoi Babang, close to the PPLB with the sole intention to bring back

merchants to begin trading inside Indonesia. But however, it may seem to fail

as well like the previous Entikong market because the government does not

consider the ease of access and the safety aspects for the Malaysian visitor to

come. The already well-established Indonesian merchant may not willing to

move to the provided location by the government as they have been far too long

enjoyed and rented their business place. Because when they move, their rented

huts where they perform their business activities will be rented to a lot of other

merchant that are very interested in replacing the vacancies. Suffice to say, if

the market currently developed by Indonesian government are not counting

upon the hospitality aspects for the Malasysian visitor and shopper, whereas

the market’s target are the Malaysian visitor and shopper, the border market

will be a waste.

B. Malaysian Government’s Perspectives Towards the Status Of Serikin Market

There has been a couple of rumors developing in the middle of the

market activity that the Malaysian government has an intention to close down

the market as it deemed illegal in the process and the activity itself. On the other

hand, resistance showed by the residents and reinforced by the merchants as

well because the market has been delivering a huge economic advantage for
 the population and it also generate a notable revenue and income for the

Indonesian merchants as they are profiting through Malaysian Ringgit which

has a stronger exchange value from the Indonesian Rupiah.

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