Missing BRIC in the wall
A consumer boom masks familiar problems in South-East Asia’s biggest economy
The Economist | JAKARTA | from the print edition
THE hoardings on the slow car journey out of the centre of Jakarta are advertising just two items at the moment: smartphones and scooters. Banks occasionally intrude, but only to offer cheap loans to buy one or the other. Lucky customers. And at the moment, what’s good for the customer is good for Indonesia.
The country is in the middle of a consumer boom, which is fuelling growth in South-East Asia’s giant. With a population of 238m, Indonesia has long had the potential to become one of the world’s biggest economies—if it could get the economic fundamentals right. Can it?
Last year Indonesia had one of the best-performing economies in the G20 club, growing by 6%. Even as the rating agencies busily revise rich countries’ creditworthiness downwards, Indonesia’s has been going the other way. It is now only a notch below investment grade. Indonesians think their economy could soon join the informal club of Brazil, Russia, India and China as a leader of the new world economic order: they want to be among the BRIICs.
Yet this is optimistic. Like Brazil, but unlike China and India, Indonesia owes much of its success to nothing smarter or more high-tech than a commodities boom. Coal and gas go to China and India, palm oil to the world. Money is pouring into the country, yet little goes into fixing long-term problems that impede growth. Indonesia has a once-in-a-generation chance to move beyond its commodities-based economy. It is not clear it will take it.
At the moment, consumption accounts for almost half of GDP growth. Nomura, a Japanese bank, reckons Indonesia is creating a middle class (defined as one with disposable household income of over $3,000 per year) helter-skelter. The country’s bourgeoisie, 1.6m in 2004, now numbers about 50m. On Nomura’s measure, that is more than India and bigger than elsewhere in the region (see chart). The number could reach almost 150m by 2014, representing one of the world’s most enticing markets. Newly affluent Indonesians are certainly spending.
Take one of their principal objects of desire, two-wheel scooters. Last year about 8m were sold in Indonesia, dwarfing sales in the rest of South-East Asia (1.7m in Thailand, for instance). Sales in India were only slightly greater, at 11.3m (China sold 16m). With rising incomes comes a desire for flashier brands. For years Honda and Yamaha had the market largely to themselves. But Italy’s Piaggio has relaunched its relatively expensive Vespa in Jakarta, after being squeezed out in the 1980s. Car sales are also growing rapidly, to about 750,000 last year.
Or take smartphones. Indonesians have leap-frogged a generation of technology, and now download data and use social media largely through smartphones, rather than mobile phones and personal computers. The increase in sales has been extraordinary; the country is one of the largest markets for Research in Motion (RIM), makers of the BlackBerry. Indonesia claims the second-largest number of Facebook members in the world, and the third-largest number of Twitter users. Companies struggle to keep up with demand for the essentials of a consumer society. Unilever has been squeezing out most of Indonesia’s toothpaste for decades; now its fastest-growing product is ice-cream, followed by skincare products.
James Castle, a consultant and former head of Indonesia’s International Business Chamber, argues that, whereas big companies used to be able to ignore Indonesia for more obvious destinations, nowadays “if you’re not here, you have to have a reason.” That is a big change. But Mr Castle also gives warning that too many companies do find a reason—and certainly do not set up manufacturing plants. Unlike in regional competitors such as Vietnam, manufacturing has lagged behind almost every other sector of the economy. It is noticeable that a high share of the new consumer desirables is imported.
For Indonesia remains, in many respects, a hard country to do business in, especially compared with the rest of the region. Its infrastructure is poor, adding hugely to production costs. Almost every other neighbour is building new ports or expanding old ones, but Indonesia’s lag far behind in efficiency and productivity. In the World Bank’s 2010 Logistics Performance Index, it ranks a lowly 75th, well below Thailand, Malaysia and even the Philippines. This means a lot of foreign investment that might want to go to Indonesia now goes elsewhere.
And then there are continuing problems of corruption and what Mr Castle calls “non-transparent random regulations”, which he says are the biggest impediments to business. In Indonesia’s murky political system, regulations often emerge out of the blue, and can contradict existing ones. At least there are signs of change. A land-acquisition bill wending its way through parliament would, if passed, make it easier to force through infrastructure projects. The government even wants to ban some raw-material exports, hoping to dragoon mining companies into building smelters and exporting higher-value goods. But more needs to be done while the going is good.
Quotation: “Money is pouring into the country, yet little goes into fixing long-term problems that impede growth.”
ReplyDeleteThis is actually a serious problem and if we mix it with the following quotation it becomes even worse:
Quotation 2: “It is noticeable that a high share of the new consumer desirables is imported.”
In my opinion, Indonesia has an approach that could impoverish the whole country. If much money is pouring into the country but it is spent only on short-term issues or consumption, then Indonesia might have a problem with long-term financing. Debt-making seems to be a popular solution to satisfy the current perceived need but sometimes the debts can’t be paid back and leads instead of wealth to poverty. Indonesia should focus on education, infrastructure and efficiency to catch-up with global development and doesn’t find itself being left behind. Exporting agricultural products like palm oil (which by the way makes the soil unusable after just 75 years as the palms pull all minerals out) is risky as they will become cheaper while high-skilled products like IT products and services will become more expensive. Also a very important point to consider is corruption. It might seem attractive to some but in the end, corruption only leads to inefficiency as only those companies paying the extra money get the order. They wouldn’t have to pay if they were the best and the government or other companies would only consider to take the best.
Indonesia is full of opportunities and chances for businesses all over the world. But you have to know their culture and have to understand their way of doing businesses.
ReplyDeleteThe problem with Indonesia is the infrastructure; there is totally no structure. By the infrastructure I mean beside of the roads also the communication. The communication inside of the company, as well as the communication outside of the company.
For example a typical Indonesian company has a lot of employees but only a few of them are really working. Why you would hire more people than you need. It is better for the economy of the country when they only hire the people they need and give those people some extra salary.
I think in the future different global companies will enter the Indonesian market. But the trick is that you have to search for the right product, on the right time.
"Why you would hire more people than you need. It is better for the economy of the country when they only hire the people they need and give those people some extra salary."
DeleteHaving "too many" employees may in part be an aspect of a more collectivist approach to society and economic life. Every wage earner is a consumer; the more people consume, the more there needs to be produced; the more there needs to be produced, the more jobs are created to produce stuff. If we "rationalise" our staff down to a bare minimum, we put people on the dole where they do not produce, do not earn [much], do not consume, and the result is less economic activity.
I'm just playing the devil's advocate, by the way.
DeleteQuotation: “Money is pouring into the country, yet little goes into fixing long-term problems that impede growth.” When I came to Indonesia 3 months ago, I could get 12.500 rupiah for € 1,-. These days I can get 15.500 Rupiah for the same € 1,-. I quoted this sentence because I find it strange that the rupiah keeps depreciating against other currencies while money is ‘pouring in the country’. When money is pouring into your country, that means people are giving you Rupiah’s for your product/ services, the currency should appreciate instead of depreciate. They pay in Rupiah so there should become a higher demand for Rupiah, which lead to an appreciation in the exchange rate, but this is not happening. A possible reason for this is that there is more money going out than there is coming into the country. Maybe there has been some changes since this article was written.
ReplyDeleteI do also see a lot of opportunities for Indonesia to become a very large player in the world economy, but they have to make it more attractive for foreign companies to invest in their country.
"Maybe there has been some changes since this article was written."
DeleteThis article is a couple of years old now. What was interesting to me about it [and what made me post it] is this:
"Nomura, a Japanese bank, reckons Indonesia is creating a middle class (defined as one with disposable household income of over $3,000 per year) helter-skelter. The country’s bourgeoisie, 1.6m in 2004, now numbers about 50m."
Living in Yogyakarta these last 10 years, the effect of this ballooning "bourgeoisie" has been plain to see. New construction, new businesses, new restaurants, new shops selling a wider range of things, new hotels [loads of them!], new leisure facilities, new housing estates [perumahan], more malls, more cars and motorbikes [partly due to easier access to credit too, of course], and so on and so forth. The change has been dramatic. I first came to Yogyakarta in 1991. It was a very different place back then.
This is what saddens me; Indonesia is currently enjoying economic growth, but we're doing little, if not nothing. to maintain it in the long run. Little is spent on infrastructure, which is a vital aspect for the Indonesian economy to thrive even more. With the current GDP growth at about 5.8%, people might still think it's a good figure, but this figure shows a slowing GDP growth from a previous average of about 6%; not to mention the inflation rate of 8.6% in July and the weakening of Indonesian Rupiah. Even though these economic indicators are showing signs of slowing down, economists from Bank Indonesia are optimistic that these factors are only temporary due to the oil subsidy cut, price increase post Idul Fitri and increase in demand for dollars due to Hajj season. They believe that the Indonesian economy will be back to normal by the end of the year.
ReplyDeleteEconomic growth of Indonesia always takes my attention lately. As a student who sooner or later will learn about this topic, I always consider this topic is one of my favorite. My opinion for Indonesian economic growth is this country is not ready yet to be classified as one of the successful developing country, especially compare to Brazil and China. Both of these countries have a strong economic fundamental to become an economic giant. Although growth in GDP indicating that nowadays more and more people in Indonesia is getting richer but we can’t hide the fact that we still not strong enough to stand without product of another countries, or we can say we still have much sectors that we have to import. Our local product still can’t fulfill the needs of Indonesia market even we can’t provide the needs of rice so then we have to import from Thailand.
ReplyDeleteAnd the growth on GDP is just a symbol that more people get more amount of money, in other hand the poor is just getting poorer. We still cannot erase the poverty in this country. This fact is quite disturbing for me because what I know, we already signed for Asia free trade. If in 2020 our economic condition still not showing a significant changes, I bet more of our people have difficulty to compete with other people from other countries. The biggest threat will come from china, with that economic power and the power of mass production with very low in cost production soon they will gain control of the economic in Asia.
Indonesia economy is actually very good but the only problem is that most of big companies in Indonesia are owned by foreigners so the very high GDP is not very good for Indonesia. And the investment from other country is only good for a short-term as it will increase their direct investment but in the long-run the money will flow out from the country making a debit in the net income and thus making Indonesia’s BOP to be deficit. This BOP or balance of payment is getting worse from day to day as Indonesian are more likely to imports product from other countries. The only way to solve this problem is to stimulating local products so it can compete with foreign firms. this could be done with imposing taxes to the foreign firms or subsidize the local firms. Not only that the effect of this BOP deficit could lead to the devaluation of Indonesia’s currency as Rupiahs demand is getting lower as Indonesian are now demanding other country’s currencies to buy the products they want. It is good to have a prosper middle class in Indonesia but if they only want to buy imported goods it will be bad for the country.
ReplyDeleteAs James Castle said, "Its infrastructure is poor..." ; "And then there are continuing problems of corruption..." those are what Indonesia really concern of. When a country want to be a leading and developed country, those kind of things: poor infrastructure and corruption need to be erased. Indonesia as a developing country need to learn from other countries.
ReplyDeleteIf the article said, there is booming in the number of consumption. Actually every country need to have trade balance where the number of import is in the same level with the number of export. It can also means the number of production must be at the same level of consumption. There cannot be a surplus or a shortage, the number of demand and the number of supply must be at the same level. But how to set the urge of producing things? Some people really need to do the action rather than complaining. How the infrastructure of your country will be good, your move is the answer.
I think that Indonesia is enjoying its economic growth right now and I think that even though its rapid economic growth Indonesia still has many problems in infrastructure and corruption problems. Barely a year ago Indonesia was the toast of emerging-market investors. The country revelled in the world’s demand for its vast reserves of coal, oil and other resources, and celebrated with a consumer boom: economic growth clipped along at over 6%. Politics was stable, macroeconomic policy sound. Foreign investors were scrabbling to get into a market of 240m people and apparently boundless potential.
ReplyDeleteToday things look different. Investors are spooked by economic concerns. Growth is slowing, even as inflation heads up. In the second quarter GDP growth slowed to 5.8%, and it will certainly undershoot the government’s target of 6.3% for the year. Inflation, meanwhile, rose to 8.6% in July. Financial markets have taken a battering. After falling by 7.7% over three days, the benchmark stockmarket index is down by a fifth from its record high in May. The rupiah, a dismal regional performer of late, is at its lowest level against the dollar in four years. Foreigners have sold $1.4 billion of government bonds since June. I think this might be the effect of our country problems and it might be good to solved those problems that might cause more damage to our economy.
The economic condition of Indonesia seems unstable in my opinion. The pattern is usually similar to cardiograph, it often accelerates rapidly up the graph, then stops or even goes down again to its previous state, might even be worse. I think this unstable pattern of economic growth is caused by various things, ranging from the different yet comprehensive individuals; corruption all over Indonesia; the distinctive ethnics and beliefs; to foreign influences. However; I do think Indonesia has lots of potential to be better, to improve the economic growth by inventing new things as we have the raw materials that just need some touching here and there so that it turns into a product. Besides; Indonesian people are proven to be intelligence, yet many of us do not have the will to push forward, to generate innovations, help researchers and our country to face a better future. We are used to rely on other people, other countries, but I say we could improve ourselves with the help of only natives, but of course, an immense commitment is needed.
ReplyDeleteOza
From my experience going abroad, foreigners usually think that Indonesians are very consumptive. Which is true, by the way. Indonesian people are likely to keep on the new things, and don’t want to be the last to know. Whatever thing is booming then it’s a must to have. There are actually a lot of scientists, innovators in Indonesia. But because of the government and the Indonesian people itself who don’t give full support to those innovators, then the innovators basically just choose to go to other countries, where they are a lot more appreciated and supported.
ReplyDeleteSo, that’s one of the reasons why most people in Indonesia are consumptive, because the non-consumptive ones are already gone to somewhere else. If those innovators stay in other countries, then investors will prefer to invest in the project where there are innovators, this make investors don’t really look at Indonesia, but other countries that have a lot more innovators.
It’s not too late to change Indonesia’s condition now. As big things start from a small step, first we can improve the way of the government works, make it more transparent, eliminate corruption and make all the complicated bureaucracy simpler.
Even if Indonesia was shown to have promising growth compared to other countries, we need to examine the elements on how GDP rose in Indonesia to begin with. As the article has said, this country have massive amount of consumption plainly from the population, but is it any good? It won’t be much good, especially if it means that our money goes to foreign companies and rarely to our own, meaning that our money are spent not for the sake of improving our own country but rather to foreign investors. If we want to give this economic growth any meaning at all, it should have come from the production of our own country’s manufactured products either sold to our own country, or exported abroad to be enjoyed.
ReplyDeleteSimply, I see this report of ‘growth’ as nothing else than a lie that this country is actually improving. Perhaps the population can consume more, but income is not distributed equally, as shown by the great existence of poverty and poor management of infrastructures that are important for the lives of many in Indonesia.
In my opinion, Indonesia which is a country with 238 million people and has a lot of natural resources has a potency to become a very rich country, but unfortunately, the regulation and the government cannot handle this. Indonesia is rich with its crude oil, coal, gold, trees, etc. but some people in the government choose to increase their own money, we can see now there is many political figure that is arrested because commit a corruption or bribery, even if there is many political figures that have been sent to the jail, the number of corruption and bribery in Indonesia is still the same, we need to do some ways to increase the economic condition of Indonesia. First, the corruptor or bribe taker should be punish by dead, second, the government has to make a regulation that is support the business man to invest here, third, government should make a supportive infrastructure for business like better transportation, etc. last, we as a Indonesian should keep the infrastructure and not ruin them. If these 4 ways is implemented in Indonesia, I am sure the growth of economic in Indonesia will be increase.
ReplyDeleteIndonesia had a big population. A big population gave an opportunity for the producer to sell their product. Indonesia provided a large market and Indonesian’s consumed a lot of goods every year. This article said, Indonesia had one of the best performing economies in the G20 club, growing 6 %. Indonesia made an improvement in the economic growth. We could survive and increased the economic growth during the crisis. What kind of factor that stimulated the economic growth? The consumption of the Indonesian’s gave a big contribution to support the economic growth. In this article, I found a fact that consumption accounts for almost half of GDP growth. Indonesian’s became a consumptive people because they bought a lot of things. I would give an example about that. Indonesian’s had a lot of motorcycle, cell phone especially smart phone. We could find one person had more than three cell phones. So, Indonesian’s should manage the consumption.
ReplyDeleteThe exponential growth in Indonesia’s middle class consumers has caused some problems in Indonesian economy. Just like other developing countries, when the county's gross income product (GDP) per capita gets higher, the purchasing power for individual also increases. As such these people will find themselves richer and likely to purchase more luxurious good such as motorcycle and smart phone.
ReplyDeleteFirstly with the increase of personal transportation means, it has been causing traffic jam in big cities such as Jakarta. As for today, Jakarta has been stated as one of the most congested city in the world. Due to this problem, it has lowered Jakarta's personal quality of life (PQL) and caused the activity in Jakarta to be less efficient. I feel that this negative externality has been one of the largest issues that the governments are trying to combat as this has hurt the economy to a large extent. Therefore the government should think of other more effective solution such as fiscal policy taxation.
The economic growth in Indonesia nowadays has two sides. The high-positive growth, thanks to increasing middle class, means that the ability to buy on Indonesians are getting higher than before. In last 4-5 years, we saw how the market demanded high-end and mostly pricey goods, like cars and gadgets. This sides led some advantages: (1) increasing taxes received by government; (2) Indonesian market become attractive for global firm.
ReplyDeleteBut in other side, this growth are ironical. Our economic growing depends on consumption, not production and industry. Middle class are well-known as “big spenders-big consumers”. So, the growth are highly depends on income. Said that if the values of Rupiah are falling down, the consumer demand will decreasing, slowing down the economic movement. Indonesian market tends to become a big market for global firm but loses its chance to grow technological and industrial ability. And then, this case means that there’s a big gap between lower class and middle class. The lower class didn't get the advantages of growing economic.
I think, the middle class should shift the consumerism to entrepreneurial and job-creation tasks, change the Indonesian market from big buyers to big sellers. The growth from industries are more stable. And then, if the middle class open their own industry, it will utilize lower class, means that lower class’ income will increase and it will increase the economic growth rate better than now.
Again, we see that Indonesia lacks on innovation and efficiency. We import stuffs too much than export. We claimed ourselves as an agrarian country, but we still import rice and soybean. We do not take care of our farmer. We keep import and import rice, while our farmers suffer from poverty because they can’t afford the price of fertilizer. Actually we have enough resources and we can use our resources more efficiently. But that’s the pathetic side of us; we do not respect our local workers and products. We keep on buying stuffs that cost high because of its prestige or its origin. When somebody buys stuff such as Blackberry, we can’t handle ourselves not to buy it. I see it like we competing each other; the more you buy imported and prestigious stuffs, the more you win. I think Indonesia should change their perspective. Start from the government, the government should support local entrepreneurs and workers, especially the small one, so they will be pushed to run their business well and then they will gain more profit. And if the government shows their support, I believe the public will do the same as the government. If government keep using and promoting the local product, public will respect more to local product and moreover if the public proud of using local product, the international public will attracted to buy and look on our stuffs. By that, our GDP will increase and local entrepreneurs, especially the small one, will feel the impact of gaining profit.
ReplyDeleteRemembering that Indonesia has many natural resources, which means Indonesia has a potential to become one of the world’s biggest economies. But, there are still many obstacles in the process to reach it. As Mr. James Castle has mentioned in the article, that Indonesia still have to face the corruption problem and the “non-transparent random regulations”. The other one is the murky political condition where the powerful ones can enrich themselves but suffocating the others. For example, some major companies getting more and more profit but they don’t pay tax. As we can see, that tax plays big role in building the infrastructures in Indonesia.
ReplyDeleteOn the other hand, Indonesia has gained many foreign investors because Indonesia has many natural resources and many human resources that can be paid with low salary. But, the investors’ plan can’t be succeed if it’s not supported by the good infrastructures. Indonesia can build good infrastructures from the tax or increase the price of fuel.
The other problem is lack of innovation from Indonesian people that makes Indonesia has dependency to other countries whether it’s normal goods or technology. I think this happens because lack of support from the government. So, the government should give more attention or being supportive to make Indonesian people become innovative. If, Indonesian people become innovative, it will decrease Indonesia dependency importing products from other countries. So, it will affect the economic growth in Indonesia.
I agree that actually Indonesia have a very big potential to be a leading country in economics in at least south east Asia. As the example about Research in Motion (RIM) for blackberry devices, the biggest consumer for that product was from Indonesia, but why the factory not build in Indonesia but goes to somewhere else?
ReplyDeleteThis is just the common circumstance that in Indonesia the tax was so high for any foreign company, after that we mostly have corruption manner in our employees, and a not clear rule to establish new company in Indonesia. Commonly the regulation or the term to build a new company was not clear, this is because somebody try to take every possible illegal advantages for his/her self, in another word we call it corruption.
We can see that the economic growth in Indonesia in 2012 is one of the best in Asia after China, last year we reach our economic growth for 6,23%. The best sector that evolve in Indonesia is selling sector like export handicraft, also from hotel and restaurant that growing 8,11% last year, and lately Indonesia evolve in construction sector.
In my opinion Indonesia should realize their potential in tourism, for example like Dubai, this country realize that their oil resources will be empty someday, and if this happen they will become poor country. Then one of their chief make decision to start convert their country oil become tourism country, and lately they make very big effort to make the best tourism country in the word.
So actually we should realize which sector is the best for our country to grow in economic.
I am Indonesian and I find this article agreeable. Indonesia have been economical sprint nowadays, and I believe it will still sprinting until there’s international intervention on it. Unfortunately, these economical sprint revenues are not used to pay debts or long term problems, but most of them are used for corruption of certain groups and consumerism. I lived in Jakarta couple of months ago, and I know the increase in scooter users are exploding day by day. It is not only scooter; peoples who are using Smartphone are also exploding in number. In 2011, you could count by fingers how many of your friends are using Smartphone; in 2013, you could count it by fingers too, but not the one who is using it, but the one who is not using it!
ReplyDeleteWhen this article said that in 2014 Indonesia will be the most enticing market, I believe it is true, and it is also our job to invest in Indonesia later on. Don’t let Indonesia being monopolized by the foreigner, make it ours!
It’s a big problem here in Indonesia. I agree that Indonesia is a big country and it can get the economic fundamentals but it never happens. Well, it’s a big country and it has a lot of potential assets but we have to improve the human resource. Indonesians need to get a higher education, more entrepreneurs are also needed, and the government needs to be clean and transparent. If the government is not clean and transparent, it would make foreign investors doubt our system. That’s why the article said that corruptions make a non transparent random regulation, which makes doing business become too risky in Indonesia for foreign investors. There’s also a big problem about Indonesia’s middle class. They consume a lot of things they don’t need just because they’re affected by society. They buy things they don’t need with money they don’t have. So it became a good business for banks who give loans and credits. That’s why so many Indonesians buy expensive cars and smartphones. The society affects Indonesians’ lifestyle. Example: Unilever that is well known by its toothpaste product has succeeded in selling Magnum ice cream by the advertisement they created. Then the advertisement affected the society. Next, society affects Indonesians’ consumption. That’s how it works. I agree with blog comments written above that Indonesia has many business opportunities and chances but this country needs to improve their infrastructure in order to interest foreign investors.
ReplyDeleteIndonesia generates a large profit from its abundant resources, such as oil and mining. We exported our commodity throughout the world and cash flows into our country in a large amount. However, it’s funny to realize that we still import rice and vegetables from other country despite of our vast quantity of land. Why? Basically, it’s because our farmers was not given any incentives to work. Let’s see 10 or probably 20 years from now. Oil and mine products may deplete through time, and they are not reproducing again. When it’s all gone, we can only rely on our agriculture to give profit to the country. So, early training and extensive practices of farming should be implemented since now to overcome on what’s going to happen in the future.
ReplyDeleteThe infrastructure of Indonesia is indeed a mess. To worsen the situation, the sales of motorcycles and cars increases every year. This proves that people nowadays are more affluent. Government allows credit in buying vehicles, thus, increasing the possibility of lower class citizen to buy as well. It is a good thing in a way, because it shows the increase of purchasing power and profit goes to the market and to the nation. However, it lags the logistics, takes more time to go to work, and not to forget congestion due to the traffic. This is why investors may be reluctant to invest in Indonesia. The government made an attempt of creating “Trans Jakarta”, which is a bus way in order to reduce private vehicle usage. However, people are used to the idea that public transport are unsafe, slow, and uncomfortable. Thus, people are not shifting to public transport, rather the sales of private vehicles increase. The government should create a new plan such as improving the infrastructure, as it would be hard to reconstruct it, speed up the construction of the monorail, increase the tax for private vehicles purchases, and also limit its production.
“The country is in the middle of a consumer boom, which is fuelling growth in South-East Asia’s giant.” From my personal experience, I can totally agree with this statement. Indonesians love to consume. That is why you can set up a restaurant, store or laundry everywhere and the people will go there to buy and consume. That is why it is possible that there are whole streets with only one type of shop, like a key street or a tailor street. I will never forget the moment when I was in Sulawesi driving down a street in a car and only saw one fruit shop next to another for probably 15 minutes driving. They looked exactly the same and all of these probably around 100 shops sold the exact same product: watermelons. It wasn’t in a city but rather in a deserted, rural area. Nevertheless, all these businesses are working – for some unknown reason.
ReplyDeleteWhen I talked to one of my friends who already stayed here in Indonesia last year, she said that it was shocking how much the traffic increased just within the last year. I would be really interested to see what Indonesia or especially Yogyakarta was like ten or twenty years ago.
As I am a business student, I of course was already evaluating Indonesia’s potential for establishing new businesses, subsidiaries and so on from abroad. In general I think Indonesia has a great potential. With the world’s fourth largest population, its high consumption rate and a fast growing economy Indonesia should be quite attractive for FDI. However, as mentioned in the article, the problems about infrastructure, corruption and lacking law enforcement are still scaring off foreign investors. But if Indonesia is able to overcome these issues in the future, it will be one of the world’s most promising economies and the BRICs will have to be renamed into the BRIICs.
With all natural resources Indonesia has, I have to say I am not surprised. I think Indonesia should be able to do better. Every single rupiah the government received should be used to increase; road and building infrastructure, and public transport. Since public transports in Indonesia are beyond worst, most people would prefer to use private transportation.
ReplyDeleteAs affect of that people who lives in the city will to save up some rupiah to buy a motorbike. Even though their house is close to their workplace people would still prefer to go by motorbike instead of public transports.
Since people prefer to choose motorbike for short distance travel, the main roads are filled with thousands of motorbikes during peak hours. However the government does not seem to care much about the traffic on the road. They just sit back and relax, hoping the traffic would change the commuter’s mind to start using the public transports.
Therefore the government needs to widen the roads, to ease the flow of traffic during peak hours.
It’s shameful, but I can’t deny that this article is actually a fact. Indonesia has lots of potentials but because of its human resources is still really low, and then Indonesia’s dream to lead the world is nothing but a dream. Government still has many tasks in order to make Indonesia’s economy better off.
ReplyDeleteBut the funny thing is that when we all know that it’s government’s responsibility to lead and support their country, they use their country’s authority to support their lives. Like corruption, for example. When the money collected from citizens are supposed to be used for development programs, they add the money to their bank accounts instead.
Infrastructures in Indonesian companies do exist, but the employees who are working in the company do not know their duty and obligations that they should obey. And having too many workers is not efficient, I think. And because of this poor cooperation inside the company, it affects the communication and cooperation to other companies as well.
It is true that our economies grows rapidly, but these poor infrastructures inside Indonesian companies will make our economies to fall once again. I hope young generations of Indonesia will work their best to make Indonesia better off.
“A consumer boom masks familiar problems in South East Asian’s biggest economy”
ReplyDeleteThe title of this article really says a lot. The economic growth in Indonesia is surprisingly good. But why do we still have a lot of internal problems that hasn’t been solved since a long time ago? This is what we should think about.
Indonesia is one of the countries that has the biggest population in the world. Of course, this can bring a good affect in the economic growth of Indonesia itself. More population means more consumers. There will be a lot of investors who want to invest their resources here. They choose to run their business in Indonesia because they think the products will be easily sold and the human resources are cheaper.
“There are continuing problems of corruption...”
This case is the most serious problem for me. With that big amount of population, Indonesia should’ve become one of the world’s biggest economies. But why do we keep having the same problems? This is because our internal contidion is so messed up. The economic fundamentals and law aren’t not functioning well. There are a lot of long-term problems such as corruption that make the lower class people suffer from poverty. No matter how big the profits the country receives, it never goes to the lower class because of this matter. I think the government should see Indonesia’s economics condition as whole. So there will be an equal distribution.
In my opinion, I think that most of Indonesians are very consumptive. Specially the people with deep pockets. That might be the reason why abroad investors would happily invest some of their bucks in Indonesia instead in their own countries. As a proud Indonesian, I feel ashamed of what you have posted above. But it is a fact. I think the major problem which causing the social symmetry in Indonesia is corruption. We have to put an end to corruption in Indonesia if we want to reduce social assymetry which is a common thing in Indonesia. If we don’t stop this rats from keep chewing on people’s money, we can not reduce the social symmetry. Logically, Indonesia should have been a leading country with the highest economic growth rate despite of it's population rate (which is,very very high) because, the more people you have, the better your country in economic aspect.
ReplyDelete“With a population of 238m, Indonesia has long had the potential to become one of the world’s biggest economies—if it could get the economic fundamentals right. Can it?” I am pretty sure that one day Indonesia will be one of the world’s biggest economies. We have all the potential to be such country. We have natural resources and plenty human resources, if only we can optimize it from a long time ago, we probably can be as successful as United States or Europe. I really want Indonesia to stop exporting raw resources and producing something on our own with it instead. Also, we should stop selling our local company to foreigners, such as Indosat that used to manage by local people but now foreigners took over them.
ReplyDeleteHowever, I am proud that our economy is growing and more people are getting wealthier. We can see that now almost all Indonesians have at least one phone. Even becak driver (tukang becak) has a blackberry. The fact that Jakarta is even more crowded and the traffic jam is getting worse implies that more Jakarta citizens can afford cars and motorcycles.
The economics growth in Indonesia. Well, as a developing country, Indonesia has a lot of economics problem. The poverty, corruption, high population, and many more. But in other side, Indonesia is a very rich country with a lot of natural resources. But the problem is the technology and the human resources in Indonesia is not well-maintained, so it actually have a big impact for the economics growth of the nation. For example, the ruber. Indonesia export the latex or the ruber to Japan. But, Indonesia import the tire from Japan. It means that the expense for importing the tire is larger than exporting the latex. It is all just because the technology and the human resources in Indonesia is not fulfilled by the government.
ReplyDeleteIn the article, it is stated that Indonesian people is very consumtive. The users of the gadget, vehicle, and any other things are growing rapidly in Indonesia. While in the other side, there are many people who can not even eat in their daily life. The Indonesian Middle class is become the problem not only in society but also in nations. In conclusion, I think the government should think about the income distribution. Because it is not about how big is the National Income is, but the main focus is how the income can be well-distributed.
Indonesia has big opportunities to become a big economy, but the obstacle is that Indonesia has to take the opportunity to turn from a commodities economy into a producing economy. For that the problem is the bad infrastructure in Indonesia. As Richelle says, not only roads and railways, but also the communication infrastructure is really poor. The internet availability in Indonesia is increasing every year, but still there are many people without internet. Another problem in my opinion is the labor productivity in Indonesia. From my perception in everyday life it is much lower than in many other Asian countries. I wonder if this is also proven statistically. Indonesia’s workers have to become more productive in order to attract foreign firms to set up their production plants in Indonesia. Also politics have to become more consistent so that firms can be attracted. If Indonesia can handle these problems it has the chance to become an important economy in the future.
ReplyDeleteIndonesia already has the absolute advantage on resources. Our land can grow good crops, and every consumable plant we’ll ever need. We have gas, coal, and every flammable resource. We have gold, diamond, and iron. We have a gigantic potential to be the biggest economies in the country. All we need to improve is our system, management skill, and entrepreneur skill, also the human resources.
ReplyDeleteIndonesian people actually is smarter and greater than we think, they just didn’t exposed themselves. So where are these people? All I know, many brilliant people that study abroad to becoming greater is getting them some job there. They got bigger salaries and better infrastructure. Maybe they think they are not valued as they have to be, in their homeland. Maybe they think they will be richer because the exchange rate. Maybe it’s true, maybe not.
My opinion is, what we need to do now is make every brilliant people of Indonesia stays, and make them productive like creating a leading business that can makes Indonesian economies growing, and make every resources efficiently used and reproduce it as a higher value item with technology, etc. We also need to campaign about stop consuming unnecessary things and use local brand.
I couldn’t agree more with this article. I knew it right away from reading the first paragraph of this article. “The hoardings on the slow car journey out of the center of Jakarta are advertising just two items at the moment: smartphones and scooters. Banks occasionally intrude, but only to offer cheap loans to buy one or the other.” My home is originally in Tangerang, but my senior high school’s located in South Jakarta. Along the side of the road, there are so many advertisements in hoardings, especially smartphones and several scooters. I forgot if there’re any banks advertisements. Indonesian people are consumptive consumers. “The country is in the middle of a consumer boom,” I remember years back then, people in Indonesia weren’t this consumptive. Maybe it’s because labor’s wages are increasing. And they are all heading up to middle economy class. Smartphones and scooters are also not as expensive as they were back then. It’s relatively become cheaper. “The increase in sales has been extraordinary; the country is one of the largest markets for Research in Motion (RIM), makers of the BlackBerry.” Also thanks to creditors, so people can buy expensive things beyond their capability. Maybe that leads to this statement “Money is pouring into the country, yet little goes into fixing long-term problems that impede growth.” Indonesian people are getting used to this consumptive behavior and become lazier to actually invent something. I hope this article open up our eyes to Indonesia’s economics situation. Thank you for reading.
ReplyDeleteI totally agree with this article and think this could be a major problem for Indonesia. Indonesia is a big country that has potential asset but isn't using it right. It is nice to hear when rich countries are having creditworthiness downwards, Indonesia's economies has been going the other way. Some people don't realize that Indonesia is a rich country. The country has coal, gas,palm oil and many more natural resources but aren't maximizing it well. Its time to stand strong without products of other countries. We should look up on China, because as a developing country they care about their local product and it eventually could go world wide as it is now. Indonesia must do the same thing. The local product should be stimulated so it can compete with foreign ones. The nation might also decrease its import if necessary so it could be balnce with its exports and should focus on domestic products to minimize the harm of the economy.
ReplyDeleteIndonesia is a growing country that really is a good country to invest. I could say this because, I know even though the current situation of Indonesia is still, I would say, messy here and there, but the Indonesian is now preparing for everything to be better, from the infrastructure until the human resource itself, even the law is now being regenerated. But I am not denying that Indonesian government still not really well prepared in many aspects, all they have is only a strong confidence that Indonesia could do this and that. They are like deciding the final in the very premature stage. Like for example the announcement of AFTA (Asean Free Trade Area) which will be started in 2014. I think for Indonesia, even though It has a big market and opportunity to grow businesses, but the structure and infrastructure is not well developed yet, moreover the human resource condition. The current Indonesian human resource is not ready yet to face and compete in a free trade area where then the foreign could enter Indonesian market and businesses easily, which mostly has high standard in everything especially in terms of professional work. A lot of corruption and nepotism things will detain this opportunity for Indonesia to develop better.
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