Good News From Indonesia

Indonesia’s presidential candidates have delivered a strong message to all voters, that once they’re elected, they’ll strive for higher GDP growth in times ahead.  The incumbent Yudhoyono said Indonesia will achieve a strong and sustainable 7% growth starting 2014,  Kalla and his pair were sure that Indonesia can start enjoying 8% in 2011, while Mega and Prabowo tried to convince us that Indonesia can even be buoyed with 10% growth.

Popularity: 3% [?]

One of the impacts of global economic downturn would be around investment, where people/companies are more considerate, careful, and sometimes reluctant to release their money to be invested somewhere else. In the 80′s and early 90′s, Indonesia was among the top destination for FDI (Foreign Direct Investment) which amounted to $20 billion a year. After that golden decade, FDI continued to fall following the Asian economic crisis 1998. But hey, the tide is up again! Last year, we booked a net FDI totalling almost $18 billion, outperforming all ASEAN countries.

This year, it is estimated that the money for investment worldwide would fall to only $300 billion, from $520 billion last year. Indonesia, due to its vast economic opportunity, political stability, and rising image, should benefit and at least keep up the good work last year. The Good News is, in Q1, FDI already reached $3 billion.

Popularity: 2% [?]

I had a very interesting discussion with a friend from Canada regarding economic growth. We tried together to select some significant factors which can lead to huge GDP growth; I personally believe that economic high-growth is almost certain to reap substantial long-term benefit in terms of poverty reduction and wider human development.

We discussed over Southeast Asian economies which once enjoyed average annual economic growth rates of 7% over many years. Malaysia, Indonesia, Thailand, and Singapore were once the backbones of Southeast Asian economies which lead other nation in the region to grow also.

The countries shared five broad characteristics during high-growth periods:

– Globalized economies. Integration into the global economy facilitates not only trades but also inward transfers of technology and knowledge from abroad, which enable developing countries to catch up economically with developed countries. Foreign Direct Investment is a major vehicle for these transfers, but so is foreign education and foreign networking by nationals. At this point, Indonesia sometimes found itself highly relied on domestic demand, which was actually not good. Malaysia and Singapore somehow protect their economy by pursuing trade surplus and promote protectionism within the country.

– Stability. Sustained high economic growth requires long-term policies which engender long-term saving and investment decisions.

– Saving and investment. High savings and investment rates sustain economic growth.

– Free markets. I do not really agree with this though. But no other system has succeeded in generating sustained high economic growth. Liberalizing product markets generates competition, and liberalizing labor markets creates conditions for workers to move among companies–a key component (alongside training and education) of protecting people rather than jobs, companies, or sectors.

– Good leadership. Sound economic frameworks are unlikely to generate sustained economic growth in the long term unless well-functioning and visionary governments maintain and drive them. These need not necessarily be democratic; from the perspective of sustaining long-term economic growth, critical elements are strategy and communication, credibility and inclusion.