News / Asia

Indonesia on Verge of Becoming an Economic Power

A crew stands at the door of a public bus during rush hour at the main business district in Jakarta, Indonesia (file photo)
A crew stands at the door of a public bus during rush hour at the main business district in Jakarta, Indonesia (file photo)

Multimedia

Audio
Brian Padden

Some economists say Indonesia is poised to become an emerging economic power similar to China and India. Economic growth slowed slightly during the worst of the global economic crisis, but now it is again expanding at a rate of over six percent a year, and Indonesia has the second-best performing stock market in Asia.

An expanding manufacturing base, an abundance of natural resources, a growing domestic market, a sound financial sector and a stable political climate all contribute to make Indonesia's economy one of the strongest in the world.

Emerging economy

Milan Zavadjil the International Monetary Fund's representative in Indonesia, says it ranks just below China and India in attracting foreign investment.

"Various investor surveys have it jumping up the rankings," Zavadjil said. "And an interesting survey puts it as the fourth most likely place for investment over the next several years among emerging markets."

The Asian Development Bank recently forecast that Indonesia will see gross domestic product growth of 6.1 percent this year, and 6.3 percent in 2011.

Zavadjil says Indonesia's financial sector was not sophisticated enough to get involved in the complicated and ultimately disastrous investments that contributed to the global economic crisis in 2008. So while much of the world was thrown into recession, the fundamentals of Indonesia's economy remained strong.

"Indonesia had a very small fiscal deficit, very small borrowing requirements, a low external government and consumer debt, adequate foreign exchange reserves," he added. "The banks were well capitalized and liquid."

Optimism for businesses

For investors, last year's peaceful presidential election is seen as ushering in a new era of political stability and optimism. Despite the bombings of two Jakarta hotels in July of 2009, government efforts to prevent terrorism have reassured the business community.

Indonesian Finance Minister Agus Martowardojo says the government's conservative fiscal policies protect investments by keeping down inflation.

"Most important we would like to manage our budget," said Martowardojo. "Yes, we will provide stimulus but we will not have a budget deficit [of] more than 1.7 percent. And I believe that is the strength of Indonesia."

Increased exports

Continued economic reforms and free trade agreements with China and other Asian countries have increased exports of commodities such as timber, coal and silver. And in some industries, such as shoe manufacturing, companies are moving factories and jobs from China to Indonesia.

Not all labor organizations agree with the country's free trade policies. Baso Rukmana, head of Indonesia's National Workers Union, says clothing manufacturers in particular are losing jobs because the government makes it too hard to compete.

Need to improve infrastructure

He says the infrastructure is not ready, the roads are not enough and there is an added cost to production, something they call under-the-table money.

Corruption remains a significant problem, and some surveys of business managers show it discourages growth. However, the IMF's Zavadjil says it is no worse than in some other Asian countries.

The finance minister says weak infrastructure, particularly the country's air and sea ports, is the most glaring problem inhibiting growth. He says the government has acted to insure that private investments in infrastructure projects that require years to complete would be secure.

"If there is any change in the policy, if there is any change of license, if there is any change of administration, will we guarantee them?. I can say now, Ministry of Finance, we are ready. We are ready to guarantee," Martowardojo said.

Although Indonesia's stock market is at record levels, the finance minister notes that other asset prices are not rising quickly, so there is little risk the economy will overheat. He says, and many economists agree, the country is likely to see annual growth of over six percent for the next few years.

You May Like

China Investigates Former Powerful Security Chief

Former security chief and member of Politburo Standing Committee, Zhou Yongkang, under investigation for suspected 'serious disciplinary violation' More

India, US Look to Reset Ties During Kerry Visit

This week's talks will be first high level interaction between two countries since Prime Minister Narendra Modi took charge More

Video Young African Leadership Program Renamed to Honor Mandela

YALI program, launched by President Obama in 2010, aims to build skills in business, entrepreneurship, public management and civic leadership More

This forum has been closed.
Comments
     
There are no comments in this forum. Be first and add one

Featured Videos

Your JavaScript is turned off or you have an old version of Adobe's Flash Player. Get the latest Flash player.
Vietnamese Staging Chinese Product Boycott After Oil Rig Spati
X
Reasey Poch
July 28, 2014 7:18 PM
China recently pulled an oil rig from an area of the disputed South China Sea that Vietnam also claims. Despite the action, the incident has had a lingering effect on consumers in Vietnam. VOA's Reasey Poch reports from Hanoi on an effort to boycott Chinese products.
Video

Video Vietnamese Staging Chinese Product Boycott After Oil Rig Spat

China recently pulled an oil rig from an area of the disputed South China Sea that Vietnam also claims. Despite the action, the incident has had a lingering effect on consumers in Vietnam. VOA's Reasey Poch reports from Hanoi on an effort to boycott Chinese products.
Video

Video ESA Spacecraft to Land on a Comet

After a long flight through deep space, a European Space Agency probe is finally approaching its target -- a comet millions of kilometers away from earth. Scientists say the mission may lead to some startling discoveries about the origins of the water on earth. VOA’s George Putic has more.
Video

Video Young Africans Arrive in US for Leadership Program

President Barack Obama's Young African Leadership Initiative has brought hundreds of young Africans to the United States for a six-week program aimed at building their knowledge and skills in fields such as public administration and business. Out of the 50,000 young Africans who applied for the program, just one percent was accepted. VOA's Laurel Bowman caught up with some of those who made the cut and has this report.
Video

Video In Honduras, Amnesty Rumors Fuel US Migration Surges

False rumors in Central America are fueling the current surge of undocumented young people being apprehended at the U.S. border. The inaccurate claims suggest the U.S. will give amnesty to young migrants from the region. As VOA's Brian Padden reports from Honduras, these rumors trace back to President Obama's 2012 executive order to halt deportations for some young undocumented immigrants already living in the United States.
Video

Video Students in Business for Themselves

They're only high school students, but they are making accessories for shoes, fabricating backpacks and doing product photography - all through their own businesses. It's the result of a partnership between a non-profit organization that teaches entrepreneurship and their schools. VOA's Mike O'Sullivan and Deyane Moses met the budding entrepreneurs near Los Angeles.
Video

Video Astronauts Train in Underwater Lab

In the world’s only underwater laboratory, four U.S. astronauts train for a planned visit to an asteroid. The lab - called Aquarius- is located five kilometers off Key Largo, in southern Florida. Living in close quarters and making excursions only into the surrounding ocean, they try to simulate the daily routine of a crew that will someday travel to collect samples of a rock orbiting far away from earth. VOA’s George Putic has more.

AppleAndroid