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"Indonesia : a future global economic leader .

By.RumRiyanto.S

Widyaiswara Balai Diklat Keuangan Malang

Indonesia a future global economic leader

Some of the best and most prestigious financial institutions in the world believe that the Republic of Indonesia is the perfect candidate for one of the up and coming economic leaders in the world. The global financial company Morgan Stanley is even optimistic that this South East Asian country will soon join the BRICs or Big Four. The term BRIC was first introduced by the Goldman Sachs Group in 2001, and it consists of four countries (Brazil, Russia, India, and China) that are at a similar stage of economic development. The four countries are expected to have Total Gross State Product of up to US$ 30.2 trillion and will overtake the G7 countries in the year 2027. Although poverty is still the main issue in Indonesia, the national economy is growing at a steady pace and more and more foreign companies are making million dollar investments in the country’s various industry sectors every year. Furthermore, some experts believe that the BRICs will dominate the global economy in the year 2050.

Goldman Sachs also coined the term Next Eleven or N-11, which consists of eleven countries namely Indonesia, Turkey, South Korea, Mexico, Iran, Nigeria, Egypt, Philippine, Pakistan, Vietnam, and Bangladesh. Indonesia TGSP is predicted to reach US$ 800 billion in the next five years and therefore the country is seen as the strongest candidate to join the BRICs. More surprisingly, Indonesia is also expected to compete with Russia, and even take over their place as said by the head of the country’s Capital Investment Coordination Board, Gita Wijawan. In July 2010, The Economist Magazine also put Indonesia into the list of the new economy power in the year 2030 apart from the BRIC. The Economist also introduced the term CIVETS, which stands for Colombia, Indonesia, Vietnam, Egypt, Turkey and South Africa. The Total Gross Product of these six countries is estimated to grow about 4.5 percent per year over the next 20 years, just 0.4 percent lower than the BRICs’ rate of 4.9 percent. Today, the projection of those international institutes has spread out even to Indonesia. Some of the country’s top executives are very optimistic about Indonesia’s future economy prospects. The Vice Director of Bank Mandiri, Riswinandi said that the country has all the qualifications to be a part of the BRICs and therefore there will not be any excuses for not adding the letter “I” (which stands for Indonesia) to the acronym. There are several good reasons why the country will make a great addition to the Big Four.

First of all, Indonesia has a total area of more than 5 million km2 and a total population of about 230 million, so it is no wonder that the country is a huge potential market of all sorts of investments. In addition to that, the national economic growth exceeds 5 percent per year. But most importantly, Indonesia is extremely rich of natural resources; the country is one of the top palm oil, tin, and coal producers in the world.

Furthermore, Indonesia has become one of the three countries in the worldwith positive economic growth in 2008 along with China and India. The country’s Purchasing Power Parity (PPP) per capita in 2009 is about US$ 3,900, higher and better than India which is only US$ 2,900. The country also has a relatively low fiscal deficit of 1.6 percent, which is lower than Russia’s 6 percent, Brazil’s 3.3 percent, India’s 10 percent and China’s 2.2 percent. In fact, the Organisation for Economic Co-operation and Development (OECD) believes that Indonesia can overcome the global financial crisis with no problem thanks to its steady economic growth. The statement was issued after Indonesia reached a growth of 4.6 percent in 2009, the third highest in G-20 countries after China and India. Angel Gurria, the General Secretary of OECD, said that the latest economic situation has given such a unique opportunity to Indonesia to catch up with their economic growth target and improve their standard of living continuously. However, in order to be one of the most powerful countries in the world, OECD said that Indonesia must make some efforts. The first effort would be to implement a reform agenda, such as fixing the tax collection system, and improving the efficiency of government spending and law enforcement. Gurria also said that the IDR 144 trillion allocated for consumer energy subsidies in 2010 must be reduced gradually. Thus, Indonesia will then have a bigger infrastructure budget to be allocated to build new and better infrastructure or fix the inadequate ones. Professor Xavier Sala-i-Martin, Chief Advisor of the World Economic Forum also mentioned similar requirements. He also added that the country must keep its macroeconomic policy stable and consistent. Sala-i-Martin also advised that the country must work hard to overcome its infrastructure issues, otherwise there will not be any investments and this will hinder the country’s economic growth.

On the other hand, Gita Wirjawan further said that Indonesia also has the potential of taking over Russia’s place in the global economy. All this time, Russia’s economy only relies on one or two business sectors and its political condition is not always stable. Indonesia, as a matter of fact, is the opposite of Russia. The country’s economic growth is contributed by the development of almost all business sectors. In addition to that, it also has a rather stable macro economy as well as political condition. Nevertheless, like Professor Xavier Sala-i-Martin, Wirjawan also stated that the country has to make haste with the infrastructure development throughout the country and finish as soon as possible. This is the one factor that matters the most, and the others will follow suit once Indonesia has proper infrastructure. When the infrastructure is taken care of, it is only a matter of time before Indonesia joins the Big Four and possibly takes over Russia’s place in the world economy. However, for speedy development of infrastructure, the government has to work extremely hard, not only to speed up the process, but also to overcome corruption

Comment :

indonesia has the potential to become one in the future, Indonesia has a total area of ​​more than 5 million km2 and a population of about 230 million, so it is not surprising that this country is a huge potential market of all kinds of investment, Indonesia is very rich in resources nature; country is one of the palm oil, tin, and coal in the world's top manufacturers. In addition, Indonesia has become one of the three countries in world with positive economic growth in 2008 along with China and India.