Demokrasi tidaklah seperti yang kita bayangkan. Kebanyakan dari kita memiliki pandangan bahwa Demokrasi memberi kekuatan penuh kepada rakyat karena kita bisa memilih pemimpin yang mencintai rakyatnya dan akan melakukan segala perubahan untuk mensejahterakan negara ini, terutama rakyat kecil. Kenyataan tidak semudah itu. Kenyataannya di demokrasi, mereka yang memiliki dompet yang lebih tebal dan koneksi yang tepat memiliki “sedikit” lebih banyak pengaruh terhadap arah negara. Inilah kenyataan demokrasi dimana mana. Di AS, kebijakan militer didikte oleh industri persenjataannya, kebijakan ekonomi dan keuangannya didikte oleh industri perbankannya dan kebijakan energinya didikte oleh industri perminyakannya.
Indonesia is a country of at least 17,000 islands, one of the most in the world and only behind (surprise!) Finland and Canada. Unlike Finland and Canada though, Indonesia is located right on the equator. The tropical climate brings lush rainforests and of course, many of the world’s best beaches.
Here is Part 1 of our personal favorites and how you can get there from Jakarta!
Tanjung Tinggi, Belitung
Photo Credit: Kompas.com
Tanjung Tinggi became a popular destination among Indonesian travellers after it was showcased in the movie “Laskar Pelangi”. What makes this particular beach unique is the large granite rocks that fills the coastline. The rocks range in sizes from few cubic meters to some that are larger than a house.
How to get there
The most feasible route is to take a plane from Jakarta (or your nearest airport) to H.A.S Hanandjoeddin. The flight will take around 45 minutes. Upon reaching, get to the town of Tanjung Pandan to arrange your accomodation. There are two options here, you may take a taxi or you may save a bit of money by walking to the main road and taking the local Angkot, IDR10,000-IDR15,000 per person should be enough to get you to town. The distance from the airport to Tanjung Pandan is around 10Km.
Tanjung Pandan City, Photo Credit: bumi-nusantara.blogspot.com
Accomodation varies in terms of quality, from regular rooms for backpacking travellers in Tanjung Pandan town to something a bit more luxurious on the beaches of Belitung. Tanjung Tinggi beach is located around 27Km (45 minute journey) from Tanjung Pandan. We highly recommend you rent a motorbike in Tanjung Pandan as your mode of transportation. It will give you the freedom to explore Belitung island and it is significantly cheaper than taking regular taxis.
What to Eat
Photo Credit: justtryandtaste.blogspot.com
Sate Ikan (Fish Satay)
Don’t let the name fool you. Sate Ikan is not grilled like other traditional Satays. Instead the fish is minced up along with other spices and then steamed. The end result is very similar to another Indonesian dish called Otak-Otak, only richer in flavor and spices. The dish can be served as an appetizer with it its own special chilli sauce (like Otak-Otak), or part of a main dish served with rice and soup.
- Travel: Soekarno Hatta/Halim (Jakarta) -> H.A.S Hanandjoeddin (Belitung) = IDR750,000 – IDR1,000,000 (Round Trip)
- H.A.S Hanandjoeddin -> Tanjung Pandan + Tanjung Pandan -> H.A.S Hanandjoeddin = IDR50,000 + IDR 50,000 = IDR100,000
- Accomodation (Tanjung Pandan): IDR100,000 – IDR300,000 /Day
- Motorbike rental: IDR50,000/Day
- Food: IDR10,000 – IDR25,000/Meal
- Misc (Fuel, Snacks, Drinks, Etc): IDR100,000/Day
Estimated Total Cost 3D2N:
IDR1,690,000 – IDR2,675,000
Banyu Tibo, East Java
Photo Credit: YoPiknik.com
Banyu Tibo is a beach in Pacitan Regency, East Java. This particular beach has a unique characteristic. It has a waterfall flowing to the ocean which will provide a unique photo opportunity rarely found anywhere else. Banyu Tibo is not very popular yet as a destination and is still relatively secluded compared to other more famous beaches in Indonesia. Additionaly, access to this particular beach is quite difficult making this destination all the more exotic.
Fun Fact: Pacitan Regency is the birthplace of former Indonesian president Susilo Bambang Yudhoyono (SBY)
How to get there
There are several ways you can get to Pacitan. You can take a bus directly from Pulogadung terminal in Jakarta to Pacitan which is the least costly travel option. However if you have a bit more to spend, you may also take a train from Jakarta to Solo then take a bus to Pacitan. The bus journey from Tirtonadi terminal in Solo to Pacitan will take approximately 4-5 hours.
We highly recommend you stay a few nights in Pacitan. There are just so many beautiful places to visit in this region that is yet to be discovered by the mainstream. Accommodations such as homestays can easily be found online through a simple google search. Better yet, you can rent camping equipments and set up by the beach which is the way our team likes to do it.
Klayar Beach, Photo Credit: carinteriordesign.net
Teleng Ria Beach, Photo Credit: eastjava.com
Amazon-like boat trip at Sungai Maron (Maron River), Photo Credit: Bombastis.com
For your mode of transportation we recommend renting a car which is available in Pacitan City.
To get to Banyu Tibo Beach, follow this route:
Pacitan City – Jalan Nasional 3 (Nasional 3 Road) – Jalan Pacitan Donorejo (Pacitan Donorejo Road) – Pertigaan Punung (Punung intersection) – Turn left and follow the road to Banyu Tibo Beach.
There is still a bit of hiking that needs to be done once you’ve reached the area. Rest assured, once you’ve reached your destination, your patience and grit will definitely be rewarded.
What to Eat
Photo Credit: perutgendut.com
Nasi Tiwul Khas Pacitan (Pacitan style Tiwul Rice)
Nasi Tiwul is a dish native to the Pacitan people. Although it is called Nasi Tiwul or Tiwul Rice, the dish is actually produced from dried cassava (Singkong) instead of the usual Oryza Sativa (Asian Rice Grain). The dried cassava is cooked and then served with grated coconuts. This dish usually comes with Ikan Bakar (grilled fish), Urap (Vegetables) and Soups, topped off of course with Sambal (Chilli).
- Travel: Jakarta -> Pacitan -> Jakarta / Jakarta -> Solo -> Pacitan -> Jakarta
- By Bus = (IDR125,000 – IDR175,000) x 2(Round Trip) = IDR250,000 – IDR350,000
- By Train and Bus = ((Train:IDR150,000 – IDR300,000) +(Bus:IDR150,000) x 2(Round Trip) = IDR600,000 – IDR900,000
- Accomodation: IDR100,000 – IDR300,000/Day
- Car Rental: IDR500,000/Day
- Food: IDR10,000-IDR25,000/Meal
- Misc (Fuel, Snacks, Drinks Etc): IDR150,000/Day
Estimated Total Costs:
IDR2,590,000 – IDR3,975,000
Wakatobi, South East Sulawesi
Photo Credit: wakatobi.com
Wakatobi is a series of islands located in South Eastern Sulawesi. It is best known for its world class diving location, occupying one of the highest priorities of marine conservation in Indonesia. And why shouldn’t it? The marine biodiversity in Wakatobi is absolutely awesome! Therefore make sure you’ve completed your diving license and head underwater when you get to Wakatobi. That’s not to say what’s above the water is not as stunning, the beaches in the islands of Wakatobi is worth the trip alone. There are also tons of other stuff that you can do there.
Sunset at Hoga Beach, Photo Credit: Luke Montague, flickr.com
Dolphin and Whale (Seasonal) watching, Photo Credit: tripadvisor.it
Unlike the more urbanized regions in Indonesia which are already clouded by pollution, stargazing in Wakatobi is still a possibility and a magnificent experience, Photo Credit: tripadvisor.com
How to get there
Wakatobi has become much more accessible in recent years. Direct flights from Jakarta to Wangi-Wangi (Wakatobi’s capital) is now available, although most flights require you to transit at Makassar.
Once you get to Wangi Wangi, you can start looking for your accomodation. There is a great variety of choices available from homestays, guesthouses, villas to luxury resorts. Prices naturally range greatly as well.
There are 2 modes of transports around Wakatobi. Taxis are available around the main island although you have to remember that none of them charges by argo. It would be beneficial to do a little survey and brush up your negotiation skills. There are also cab rentals that are available daily. To get to the other islands, speedboat services are available although it’s schedule is not yet reliable, you could always rent one personally which would be more costly.
What to Eat
Kasoami is a dish native to the Bugis people in South Sulawesi and Buton people in Central Sulawesi. It is made from fermented Tapioca that is cooked into cone like shape. The people of Sulawesi loves their seafood and would eat Kasoami along with several dishes which includes plainly grilled fish (usually served with their own style of chilli similar to Dabu Dabu in North Sulawesi) along with several types of fish soup.
- Travel: Soekarno Hatta/Halim (Jakarta) -> Bandara Matahora (Wangi Wangi) = IDR2,800,000 – IDR3,600,000 (Round Trip)
- Accomodation (Wangi Wangi): IDR100,000 – IDR1,500,000 Daily
- Transportation: Car Rental + Speedboats: IDR250,000 – IDR1,000,000 Daily (Varies greatly depending on bargaining, number of visitors etc.)
- Food: IDR10,000 – IDR25,000 /Meal
- Misc (Tips, Snacks, Drinks): IDR100,000 /Day
Estimated Total Cost:
IDR3,740,000 – IDR11,625,000*
*Note: Due to lack of reliable mobility around the islands of Wakatobi, costs will range greatly and will usually end up much more expensive than initially budgeted. Unless you’re planning to go extreme backpacking into Wakatobi, it is much more feasible to join packaged tours that are available online to maximise your experience on the islands at a much lower cost.
1. Agus Harimurti Yudhoyono
SMA Taruma Nusantara Magelang
Nanyang Technological University
JFK School of Government
Agus is the son of former president Susilo Bambang Yudhoyono (SBY). He has a strong educational background and a stellar career in the military. However, many would argue that he is an extension of his father’s political ambitions despite having achieved much personally. He has no experience in governing as he is fresh off his military career.
- Highly impressive educational background glittered with various awards, high achiever.
- Strong career in the military, highly respected in his ranks.
Weaknesses & Threats
- Little to no experience in governing. Governing a city like Jakarta is vastly different to a military career.
- Looks to be cut in the same mould as his father who had plenty of unresolved scandals during his term as President.
2. Basuki Tjahaja Purnama
Weaknesses & Threats
3. Anies Baswedan
Weaknesses & Threats
This analysis will be limited on the most liquid forex pair (EUR-USD and USD-JPY) as they generally dictate USD’s power against broad currencies in general. EUR and JPY may present negative outlook for 2017. Our forecast indicate that the USD will be stronger against other currencies in general. This strength would be supported by the weaknesses of EUR and JPY.
Current move of USD is ranging with limited move as the market is still waiting and speculating for a still uncertain rate hike decision. Many economists predict that there would be 1 hike by the end of this year followed by another 1 or 2 hike in 2017. The expectation of hike in 2017 will support USD strength. Why are the rate hikes likely? Because global economic condition is starting to improve (no more Brexit and China major slowdown). This “no major global risk” condition should be an opportunity to increase the rate. However US’s inflation is still far from target of 2%. The fed has been waiting for this 2% target to be achieved.
However some of the fed members had agreed that chasing this inflation target should not be a priority over rate hike plan. This is because the increased interest rate will be a defense for future economic crisis or become stimulus for future significant slowdown. Given these reasons we can speculate that at least 2 rate hikes will happen between 4Q2016–2017, which will support USD value.
Euro has shown weak economic data in 2016, especially after Brexit.
- Low economic growth
- Low inflation (ECB’s medium term target is close to 2%)
- Composite PMI – much lower business expansion
Given the negative outlook, market has expected ECB to cut rate further and increase stimulus program. However ECB stated in September there won’t be further easing for now. This will cause europe’s economy to remain slow in 2017. On the other hand, increasing the rate is an unlikely option. Even with current bechmark rate at 0%, there were large non performing loan, especially in Italy.
The low benchmark rate which failed to stimulate the economy, has hit banks’ earnings. This could be reflected from the slump of european banks’ stocks.
This deadlock of slow growth, bad debts, and too low interest rate will significantly hit europe’s economy in 2017.
Why is the Japanese Yen forecasted to be weaker than USD in 2017 ? Because current yen level is too strong, it has hit Japan exporters. This is not good for Japan as Japan is a net exporter.
- Downtrend in export
- Slow growth
- What’s even worse? Deflation
Those weaknesses coupled with already negative interest rate, would be a serious pressure on JPY accumulated in 2017. The market expected BOJ to give more monetary stimulus and possible fiscal stimulus (helicopter money) to depreciate the yen to a sustainable level for Japan’s economy. BOJ may no longer be able to avoid these stimulus expectations in 2017 (despite an issue in the legality of fiscal stimulus in the form of helicopter money) since Japan’s economy may fall further in 2017.
This analysis will be based on the data up to 3Q2016. For 2017, there are several reasons why the global economy may slowly improve. Commodities price has started to stabilize. Oil price has reversed up from the slump in 2015. China’s data has been showing positive signs. UK also proved that Brexit fear is slighted exagerrated as latest serials of data turned out to be positive. However there could be some weaknesses in Europe and Japan. US economy could be improving, although not significantly assuming gradual rate hike between 4Q2016 until 2017.
We will first dicuss US’s prospect then the prospect of the global economy. US year-on-year GDP growth is still weak in 2016 (below 2%). This is coupled with “still far from 2% target” inflation. On the other hand, instead of giving stimulus like the rest of central banks, the fed plans for gradual hike. This could give pressure for US growth in 2017. However as China’s economy and commodity prices have started to improve, US may get some support for growth. Therefore US outlook seem to be slightly positive in 2017.
For explanation of 2017 global outlook :
I. Commodities price has started to stabilize
- Bloomberg Commodity Index (source : bloomberg)
- WTI Crude Oil Price (source : NASDAQ)
With the OPEC countries and Russia (based on last meeting in Algeria) agreeing to be cooperative in the need of price stabilization, next year oil price outlook could be positive. This positive outlook on commodities price will support growth on commodity exporting countries. Most of emerging market, whose economy mostly supported by commodities, will gain from this condition.
II. China has started to slowly recover
Although the overall growth trend within 1 year is still negative, the July growth (6.7%) has slightly beaten market forecast of 6.6%. This might show that China has started to erase expectation of further slowing growth, although significant growth improvement in 2017 would be unlikely. China’s import growth has also gone to positive territory in August 2016 from nearly 2 years of declining imports yoy growth.
- China’s imports yoy growth (source : self-generated graph from CEIC data)
This could mean improving global demand from China which is a good sign for global economy.
III. Brexit impact on UK proved to be limited
- GDP growth post Brexit turned out to be positive
- UK Composite PMI (source : )
Business contraction in July has bounced into expansion in August (more than 50 indicates expansion). These data gave positive outlook on UK’s economy.
IV. Euro and Japan weaknesses in 2017
Both countries already have low interest rate ( euro 0% and japan 0 until -0.1%) which have been reduced during 2015–2016 to support their stimulus program. The stimulus however proved to be not effective enough to stimulate growth.
Moreover these countries are still far from their inflation target. The low interest rate will make future monetary stimulus to be harder to implement. This uneffectiveness of monetary stimulus could be caused by the still existing problems that have not been completely extinguished. Euro area has large bad debts (non performing loan) problem, especially in Italy. Japan has low consumption and too strong currency rate. These problems may accumulate in 2017.
When we’re talking about growth, demographics is a key factor and is probably the most reliable indicator (albeit incomplete) in forecasting the long term future. The productivity of a country is not determined by the size of its population but rather the size of its working age population. It is the people of working age who contributes the most to the output of the economy, not the seniors or the children.
We can already see this phenomena starting to take place, it is no coincidence that Europe and Japan’s slowdown in growth coincides with its stagnating or even diminishing population. A Government can do so much in sustaining economic growth but ultimately they are working with less and less people which makes it difficult.
Image taken from– A common age demographics of a developed nation, the decline in the number of young population indicates a decrease in the workforce and the overall population in the near future.
This phenomena does not occur without a cause, as countries develop, they will incur inflation and in the long run will become more expensive to live in. This causes many people to have less kids. Some may even choose to not marry at all which has become quite common in modern cultural values.
That being said, there are several countries and regions in this world that will have a burgeoning workforce in the next few decades. This provides them a solid base for development.
Note: China is a very special case, they are currently at the peak in their workforce numbers, unlike Japan and the other developed nations which are gradually declining naturally. However, their past one child policy can potentially be a huge blunder as they will experience drastic demographic changes in the next few decades.
Peaking in the next 10–30 years:
South East Asia Region
These are the countries that have the potential to be the next bull markets in the near future. Much has been said about the 21st century being Asia’s century and looking at the demographics, it’s really not hard to see why. The next decade or so, the countries in Asia (barring East Asia: Japan, South Korea and China) and several countries in South Africa region will have an optimal number in their workforce which would lead to greater productivity in their respective economies.
Will peak in the next 30–50 years:
West Africa Region
There is a strong case that after Asia develops, it will be Africa’s turn. Many countries especially in West Africa have overcome their turbulent past and is now looking forward to a bright future. Their population is rapidly increasing and its very possible that in the not so distant future, they too will enjoy rapid economic growth.
There are 2 types of countries and regions that i have exempted from this analysis. The first type of countries are countries that have a high turnover in immigration. These countries are usually English speaking and are the business and financial hubs in the world. This includes the USA, UK and Singapore. Demographic changes are almost unpredictable in these countries as people continuously migrate in or out. They already have a highly dynamic economy and looks likely to stay that way for a while.
The other type of countries i have omitted are countries that are still continuously mired in conflict and political uncertainties. These countries will have no clear pattern in their demographics until stability is achieved. This includes several Arab states and countries in Central Africa.
Probably the most important factor that makes Singapore a hub is that it has always been a politically stable country. Much of this has to do with 2 factors: a relatively small population making it easier to govern, and the competence of the dominating People’s Action Party set by Lee Kuan Yew. Political stability such a crucial ingredient in becoming a financial hub. Many big corporations would only choose to base their operations in a highly stable country with low corruption and a well enforced rule of law.
This is something very hard for Indonesia to achieve especially ever since the democratic reformations. There are many different parties continuously wrestling for power with their own vision. The long term direction of Indonesia is therefore not predictable with public sentiments continuously changing, some times the people want a free market economy, other times they want to be protectionist, much depends on which side is the most convincing at that moment. This will continuously hinder Indonesia’s prospects of being a financial hub as many businesses would always think twice before taking the risk of opening shop in Indonesia as they can never know what is going to change tomorrow. Unlike Singapore, that for many decades have a clear vision and therefore enjoys great stability.
What this also means for Indonesia is that they can’t have a financial sector as strong as Singapore’s. An advanced financial sector consists of many investment banks, wealth management and business consulting firms. Many of these firms can only prosper on a busy and stable business environment. This is a hallmark of the financial hubs as the establishment of these services places the city/country as one of the centers for money and investments in the world. Wealthy individuals from around the region would come and park their money or invest in instruments provided by these advanced financial institutions, thus bringing large sums into the country. Jakarta and Indonesia meanwhile simply do not have the ingredients to facilitate these levels of advancements in its financial sector. They would definitely grow to become a regional power in the future as they currently only have less than half the population that are using commercial banking services, thus great space and potential for growth. To be one of the hubs in global trade however is something else entirely. It’s one thing to get the common people to bank a bit of money in their savings accounts, it’s another to get billionaires from other countries to save and invest their money into the country, and thats where all the big money and investments come from. That’s what makes a hub.
There are two ways a country can find itself in a situation where it can’t repay it’s debts. Either the Government has been borrowing excessively for it’s fiscal policy and defaults on their short term obligations. The other way is when there is a systematic failure in the country’s banking system which leads to the Government having to bail out the banks. We are going to discuss the aftermath of both these situations.
Firstly the Government of the country will approach/be approached by the world banking institutions, the “lenders of last resorts” such as IMF and the World Bank. Several countries in Asia and Africa will also be negotiating with China’s Asian Infrastructure Investment Bank (AIIB) and Asian Development Bank (ADB). Meanwhile countries in the EU will also be negotiating with the European Central Bank. The indebted country will negotiate for new loans to service their short term obligations they couldn’t cover. Negotiations will be on how the country will restructure their economy to warrant these new loans. This includes providing plans on how the Government will increase their tax revenue and which Government spending will be cut. The IMF will usually propose several reforms for the country.
If the current debt levels are at a very critical level, there might be negotiations on the sales of the country’s national assets. The assets can literally be anything the Government owns from state owned enterprises or even Government owned buildings and properties. The Greece debt crisis resulted in several of their airports being sold to German firms.
After an agreement is met, the Government now has the funds to meet their short term obligations and prevent default. However, the hard work is just about to begin.
Impact on the economy
The first thing that will happen prior to default is foreign investors and investments will rapidly pull out of the country. Usually coupled with other external factors, all of this will cause the currency to weaken drastically, thus causing rapid inflation in the country. Riots and strikes would then follow causing most business activities to come to a standstill, halting the economy.
Asian Financial Crisis, Indonesia 1998
Greece Sovereign Debt Crisis
Most banks will close, either temporarily or even permanently as they cannot cope with the drastic amount of cash withdrawal caused by the panic of the population. Many businesses may not survive and go bankrupt resulting in the overall economy (GDP) to shrink.
Some countries such as present day Venezuela (above) is experiencing an economic crisis at such a critical level, the Government is forced to ration out goods for the people.
If resentment has been rising towards the incumbent head of state, calls for impeachment might occur as the people calls for drastic change on the system. The replacement then will bring messages of optimism and bring about major reforms. Slowly, with large sacrifices from higher tax rates and massive cuts in Government spending, the economy may gradually recover.
Indonesia Democratic Reformations, 1998
Greece’s Syriza Party led by new PM Alexis Tsipras
It is much harder for countries with a large population to overcome the middle income trap.
Manufacturing is an essential driver of growth when transitioning from an undeveloped to a developing economy. It adds more value than agriculture produce, it employs many people with decent wages, and it brings technological and capital intensive investments into the country. However, in order to overcome the middle income trap and make that jump to a developed economy, a country needs to add high value, and this is where some countries get it and some countries don’t. These are the 2 most important ingredients to overcome the middle income trap.
Indonesia currently has near full enrollment for primary school education. However, moving up to secondary school that number falls to around 66%, high school enrollment is even lower at 45%. As a result, only around 11.5% of Indonesian children makes it to University level . In order to become a high income country, the Indonesian Government must make higher level education available and possibly even compulsory to all. World Bank has set a benchmark of high income countries at USD12,500 GDP per Capita, Indonesia currently has a GDP per Capita of approximately USD3,800 therefore in order to beat the middle income trap and become a high income country, Indonesia must create a workforce that is capable of creating USD12,500 of value on average per Indonesian (rough representation). Education is the key ingredient as many high income jobs require higher level education.
Innovation & Entrepreneurship
Educating the people to be able to take on high value jobs is only half the work, the Government also needs to provide these jobs so that it is widely available to the people. However, a Government can try all they can to attract foreign companies and provide high paying jobs, ultimately, high income countries need to have strong innovation and entrepreneurship which can potentially create so much more value and employ many more people. Put simply, you cannot get rich working for someone else, then apply it on a national scale. This is what differentiates the successful high income countries to the middle income countries.
These are the 2 key ingredients to overcoming the Middle income trap. Now lets talk about why countries get stuck in the middle income trap for further insights.
Inflation: This will naturally happen to every developing countries. As countries develop, the income of the people increases and as income increases, domestic prices rise. When an undeveloped country transitions into a developing middle income country, there comes a time when foreign manufacturers that have been investing into the country and thus contributing heavily towards its growth, suddenly find it more profitable if they outsource their productions elsewhere because domestic prices have already increased. Suddenly the impressive growth that the country enjoyed, significantly slows down and will most probably never reattain that same level of impressive growth rate. This will happen long before the country reaches High income status. The worst thing about this is that it can lead to more serious problems. Investors tend to flock together so whenever there are signs of significant capital outflow, investors would jump ship together thus creating a possible recession.
Politics: This can come in many forms. First of all when a country’s economy develops rapidly, the gap in income inequality tends to widen. This is because many people may get rich in the process, prospering from new business opportunities. However the low income people would be left behind as domestic prices and living costs will increase. This may create dissent among the population. Best case scenario, the Government might have to spend a bit on welfare programs to assist the lower income demographics, which will be a dent on the National Budget that could have been invested elsewhere. Worst case scenario is a potential political crisis that will drag the economy down for years before it truly recovers. This was what happened to Brazil in the 1980s which triggered their long period of middle income trap.
Lack of Innovation and Entrepreneurship: Some countries just do not have a strong culture of innovation and entrepreneurship. For these countries, its much trickier because the fundamentals of the problem is so deeply rooted, the best the Government could do is to continuously ease business processes by removing unnecessary regulations that makes it hard for common people to do business. An example of this would be Thailand, a country that has been quite stagnant in their growth for quite a long time despite possessing a very strong manufacturing sector. The Asian Financial Crisis played its part for sure, but ultimately most of it has to do with their inability to transition their economy to be driven by the higher value sectors, which would have generated much higher income.
Currently Indonesia is just about to enter the middle income benchmark. One distinct characteristic in Indonesia’s present day economy is that Indonesia already has a huge service sector relative to the other sectors, and growth in this sector has shown no signs of slowing down. Is this a good thing? Economists are still divided on this issue. Big populations like Indonesia cannot emulate smaller countries like Singapore which straight away made the jump into a service economy. The conservative view in economics is that countries need to develop through the traditional stages in order to be well balanced and if the manufacturing sector were to be ignored, Indonesia might run into some serious problems in the future. Nonetheless there is a positive that can be taken from this. Indonesia seem to have the right environment to promote strong growth in the near future, especially in the higher value services industry. This can be attributed to 2 factors:
- Indonesians generally embrace technological advancements.
- Indonesians are generally consumptive in nature.
These are 2 very valuable traits to have for a strong economy. The positive attitude towards technology will generally help Indonesians move up as it provides them with endless opportunities. E commerce sites have helped in creating a larger competitive market that the lower income people can participate in. Many mobile applications such as Gojek have disrupt and enhanced the landscape of industries creating much value for the economy.
Meanwhile, the consumerist behaviour will facilitate the growth of entrepreneurship and businesses, big and small as they will always have space to grow and meet the unlimited demands of Indonesian consumers.
The Middle Income Trap is inevitable, especially for a large country like Indonesia. If i were to make a prediction though, i think Indonesia will do quite OK, potentially better than Thailand and even Brazil. Probably not as well as Malaysia did though simply because Malaysia’s much smaller population is easier to manage and transition. However it comes under these 3 terms:
- Fix lagging manufacturing sector
- Rapid improvements on the education system, improve enrolment and quality of education
- Remain politically stable for the next few decades