An increasing number of foreigners and analysts have warned Indonesia against complacency and being insular with regards to its economic policy, even though the country recorded the highest economic growth in Asia, after China, despite contraction in Europe and slowdown in the United States.
Even though Indonesia dropped four rungs in the World Economic Forum's (WEF) Global Competitiveness Index (GCI) for 2012, which surveyed 144 countries, the country remains in the top 50. In fact, Indonesia is seen as one of the top places for investment due to its huge domestic market and rich natural resources, plus the uncertainty in European and American economies.
So, should we simply sit back and relax, disregarding the warning signal from the Geneva-based WEF?
Deputy Trade Minister Bayu Krisnamurthi played down the findings of the latest opinion polls of business leaders, warning against paying too much attention to the index.
The latest GCI, which defines economic competitiveness as the set of institutions, policies and factors that determine a country's level of productivity, actually conveys a message of caution for Indonesia - it has slipped in the index for the past two consecutive years, from 44th in 2010 to 46th in 2011 and 50th this year. By comparison, Thailand was 38th this year.
Yet even more worrying is that Indonesia's shortcomings were most glaring in the basic areas of competitiveness, due to widespread corruption, bribery and unethical behaviour within the private sector, and poor and inadequate physical infrastructure.
But as the country has entered the efficiency-driven stage of development, its competitiveness increasingly depends on more complex elements that cannot automatically be resolved by economic growth.
Standing out among the weaknesses, besides corruption, is burdensome bureaucracy and rigid labour laws.
The survey praises Indonesia for the satisfactory quality of its virtually universal basic education but warns that if it cannot generate enough jobs outside agriculture for the growing population of educated youths, the consequences could be dire for social stability.
But as its vigorous development generates new needs and sets new standards among businesses and consumers, challenges in the microeconomic sectors would become more complex as well, especially because the incidence of absolute poverty remains high at almost 13 per cent of the total population, or more than 30 million. That figure could skyrocket to over 100 million if the poverty line is raised to the equivalent of US$2 (Bt62) per day.
Within the microeconomic perspective, Indonesia lags even worse on the Doing Business Index, which is conducted annually by the International Finance Corporation, the private sector arm of the World Bank. The Doing Business Index is based on indicators such as expediency in business permits, tax administration, contract enforcement, investment protection, labour regulations and basic infrastructure.
Indonesia scored very poorly in the "2011 Doing Business Index", 121st out of 183 economies surveyed. By comparison, Thailand was 17th. Indonesia ranks even below Vietnam and scores only better than the Philippines. Our poor records in most of the indicators used to measure the ease of doing business are strongly validated in the eroded competitiveness of our manufacturing.
This poses an enormous challenge because the best way to check the current account deficit, which ballooned to $10 billion in the first half due to the big deficit in merchandise trade and services, is by expanding the manufacturing capacity to meet the rising domestic demand and increase exports of industrial goods.
Latest stories in this category
- X-rated (for extremists only)
- Furore over film shows Islamists are willing to..
- QE3: Others pay the price for Uncle Sam's woes
- The warning signs for Indonesia's economy
We Recommend
- US Embassy to close ahead of film rally
- Several hundred Thai Muslims tipped to protest in..
- Can 7 wise men solve Thaksin impasse?
- PM pressures BMA for answers
Comments conditions
Users are solely responsible for their comments.We reserve the right to remove any comment and revoke posting rights for any reason withou prior notice.
Source: http://www.news.thethailandlinks.com/2012/09/21/the-warning-signs-for-indonesias-economy/
0 comments:
Post a Comment