Economic War

The world order is under the rule of developed countries. This premise should be understood well by developing countries. China – and not Iran or Venezuela– as the best pathway of developing country gives the best examples what can be done and how to deal with the America-defined world.

Too Much Freedom Will Kill You

We often presume that democracy is the final form of government. The ideal system is a group of people representing others to govern and making laws. And choosing our representatives and leaders are undertaken regularly by elections in certain time. We praise this as democracy, the ultimate state system.

To Govern is To Sell

The government has the full responsibility for the prosperity of its citizen. The prosperity attributes to people's incomes and government's revenue. Those incomes and revenues come from selling things! The more you can sell, let alone the added value ones, the more prosperous you will be.

Indonesia is A Learning Nation

Despite the low ranking of Human Development Index (HDI), 111 out of 182, Indonesians should be very proud to know that their top officials who manage this country like learning so much.

Indonesia’s Insufficient Economic Growth

For Indonesia or any developing country, economic growth is everything because it eventually reflects the prosperity of a country. After reaching the certain amount, Gross Domestic Product (GDP) growth will not be the main goal. It happened in the developed countries where the growth often less than 3%, but it does not hurt the prosperity.

Spurring Innovation in Indonesia

The prosperity attributes to people’s income. People’s income stems from salary or wage. Salary or wage is determined by the value of products. The more added value products than the more prices they have.

300 kg iron is cheap but 300 kg iron in the form of luxury car will be very expensive. 2 decades ago only small number of manufacturers could produce cell-phones, but now even fledgling manufacturers in China can produce them. The ordinary cell-phones experience decreasing value. To increase the value, Research In Motion (RIM) of Canada created stunning Blackberry which focus on their friendly connection with internet, Apple created incredible I-Phone with amazing design and unique features.

The efforts to increase people’s income are the efforts to add value of products. And innovation is the key to this goal. All the government policy should ensure that the companies operating in its own territory pursuing innovation for their products continuously. The tenet is to innovate or die.

Innovation is the mixed ingredients of education, risk taker innovation, crazy venture capitalist, rules of law and others which cannot be identified. Yes, there is no certain recipe to nurture innovation. Despite the success of Silicon Valley, it cannot be copied to other place like Boston Route 128.

However, the main ingredient of innovation is the innovative products. And then the important thing to make them accepted by market. And there no one or shaman knows about the future innovative products. There is someone who dare to gamble investing in new product without knowing what will happen. That is venture capitalist in United States or even the government such as in Singapore.

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Given this facts, Indonesia has a great challenge to spur innovation in this country. The downside of our nation pertaining innovation is we have no passion to work hard to create new products, instead we prefer the easy way to buy the license.

We can compare the automobile development in Indonesia and Malaysia. Until now we have no national automobile industry. The most popular car in Indonesia, Toyota Kijang, still depends on Toyota technology. It seems it will last forever. In contrast since the beginning Malaysia developed Proton despite it was Mitsubishi. And Proton shows its independence by buying the majority stake of Lotus. So the Malaysian can combine the technology of Mitsubishi and Lotus to develop its own national car.

Another example is electronics manufacturers, National Gobel. Previously, it was national electronics company with national trade mark Tjawang. Unfortunately in order to increase its capacity, Gobel invited Japanese Manufacturer, National. Tjawang disappeared, so did the chance of national electronics trade mark.

I don’t know what kind of Indonesia’s government policy on innovation. Or do they have one?

We have PT. INKA producing trains, but why did the government still import used trains from Japan. It's very silly. The INKA's products might not be as good as Japanese products, but they should be encourage to improve their product by giving them sustainable contracts.

We have also national trade mark such as Polytron. The government should help them by buying their products and giving them incentive to conduct research and development. We have Maetrika who nurtures Indonesia’s innovative starts-ups companies. The government particularly state-owned companies should support these innovative products so that these start-ups have enough cash to conduct research and development and create new products.

The government does has responsibility to support the innovative companies. It is not against free market. Even in United States the innovative company such as Hewlett Packard had been given contracts from the US government.

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A Spirited Nation

There is a lessons learned from America who is grappling its declining superpower. Newsweek magazine places America as 11^th (not 1^st) best country in the world. In the wake of financial crisis and 2 unnecessary wars in Iraq and Afghanistan, it seems America has lost everything. Apart from computer gadget and software, America has faced fierce competition, not only from the established nation like Japan, but now also from new emerging countries such as China and India.

Declining nation likely attributes to its education. The big budget American school reforms result in only meager success. The average students' test scores so this still-underperformed ability whereas the reforms had covered many aspect of education including the great teacher, institution improvement, better principal, better student-teacher ratio . The Washington Post economics columnist Robert Samuelson proposed another cause which is almost unmentionable: students shrinking motivation.

Thomas Friedman spelled out this low-level motivation as the consequence of disappeared threats. In the last century, Americans had a clear and present danger of depression, Nazi and Communism. Now all of them are gone, so Americans has less reason to work hard, develop innovation and sacrifice for the country.

As the threats are gone, so is the spirit.

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From this lessons learned, we come to conclusion that it is imperative for a nation to have a real challenge, a real problem to solve and a single theme to garner resources to achieve one goal. A threat should be renewed in each generation.

In Indonesia we have Bung Karno whom a great leader of our nation coining "Merdeka" (freedom) as the then-aspiration of the nation. It was a great success because different tribes, different languages across Dutch-administration Indonesia marched behind Bung Karno leadership. However Bung Karno failed to elevate to the next step to develop economy and modern institution of government. He cannot relinquish himself from the revolutionary tone even when we don't need it anymore.

To some extent, Pak Harto succeeded to coin "Pembangunan" (development) as a single theme during his long stint. Despite his weakness to control corruption and nepotism, he outperformed any Indonesia's presidents in terms of economy and national pride. Owing to Pak Harto, we inherited stability and cornerstone to develop.

In similar vein, Mahathir Mohammad of Malaysia has one thing describing his entire policy, to enhance Malay's standard of living. Deng Xiaoping struggled for decades to prove the socialism does exist and it is not the same with poverty.

So, a nation should encapsulate its challenges and create a simple theme to address them so that the whole components of nation: teachers, researchers, businessmen, government officers give their best to achieve the clear national goal.

Sources:

1. http://www.nytimes.com/2010/09/12/opinion/12friedman.html?ref=thomaslfriedman
2. http://www.washingtonpost.com/wp-dyn/content/article/2010/09/05/AR2010090502817.html

The It-Should-Be Indonesia’s Path

According to CIA Factbook, 42.1% of Indonesian labors work in agriculture sector which makes up only 15.3 % of GDP. It is not good figure and wasting the potential labors. The Prebich-Singer Thesis tells that the manufactured goods value tends to increase against commodity value. If now you export 100 units of commodities then you will get 50 units of manufactured goods, in the future for the same level commodities can only be exchanged for less than 50.

It is because of income elasticity of demand for manufactured goods is greater than for commodities especially – food! The poor eats a plate of rice so does the rich. However the rich needs Blackberry, IPad, Kindle, whereas the poor can't afford them. As the income rise, we still eat a plate of rice, but our demand of manufactured goods will inevitably rise.

Given this fact, the urgent policy of Indonesia is to shift the low-waged labors of agriculture sector to higher-waged labors of industry and service sector.

Too many people work in limited area of agriculture resulting in low productivity. If the farmers-to-be work for industry then the few farmers has more agriculture area. Then the agriculture equipment industries should be grown to support the few farmers to manage their farmland. By doing this, the agriculture productivity will beef up and the farmers' income will rise.

Agriculture has ingrained the Indonesians but building industry is different story. Industry needs more skills and good education to support it. This sector is where the valued added products begin. It is not easy for the country like Indonesia to develop industries on its own efforts. Fortunately the globalization offers the great opportunity for developing country to develop the industry sector. Thanks to their success, the salary in developed countries rises to the level that cuts profits so that they have to relocate their industry for the lower-paid labors. The task for developing country is to lure the foreign direct investment. The best way is to prepare economic zones with superb infrastructure and without red tape. Indonesia should prioritize this.

The industrial workers will make money much more than the unproductive farmers. As the few farmers become more productive too, eventually the national income per capita will ramp up.

In a nutshell this is what Indonesia's government should do.

First, to shift massively most of farmers-to-be to industry sector. The rest of farmers will have more area to grow plants. The modernized farming using mechanical equipment should be introduced. The productivity and income of agriculture sector will increase.

Second, to thrive industry sector. The industry for the agriculture equipment is the first thing to do. And then prepared competitive economic zones to lure multi-national companies.

Third, to prepare the post industrial phase through innovation. It is the most difficult part to develop nation because it need skillful workers, best education and the right circumstances to nurture start-ups with new innovative products.

Leadership in Courage

Some leaders are remembered that last forever. They are adored by many fans across the border, across the race, across the cultures and across the time. As stated by many experts the difference between business-as-usual leader and inspiring leader is that the latter has courage to change the world. In details is that the true leader – during their time – is to put his extraordinary vision at stake. It means they take the risk of failure. And to do this courage, pertinacious, brave-heart is much needed.

The greatness of leader is attained when his idea has been successfully transformed into action and resulting in the great achievement. Only through this way we acknowledge and adore the leader.

Prophet Mohammad SAW was taking a great risk when he tried to elevate the Arabian from the marginal society to the civilized one. It was not the easy task, since the culture and people's mind had been ingrained for thousands of year. But he had reached his vision in his lifetime and moreover he changed the world by spreading the new value of life. Eventually many people in this world preserve his teaching to date.

Moreover there are many examples of leadership in our era. We will remember Deng Xiaoping, Lee Kuan Yew, Mahathir, Pak Harto and Pak Habibie, not only because they had ever been state leaders, but they had done something risky to serve the country. Certainly some last in grace but some did not make it.

Deng Xiaoping took ideological risk to open and connect China to the rest of the world. He conducted trial and error to develop the first China special economic zone in small fishery village, Shenzen. It was a great success and the followed by other special economic zones and the rest is history. And now none can analyze Chineses success without mentioning Deng.

Lee Kuan Yew did not develop Singapore from scratch. It was the hub cities for regional area for decades. But had he had a great vision to make Singapore always relevant to the world's needs, Singapore would not have been attractive for foreigners to establish bases for regional services.

Mahathir Mohammad has a vision to make his Malay race to be better living. He envisioned to achieve the developed nation status in 2020. And the best lesson from Mahathir is that he developed Multimedia Super Corridor 1996 to address the progress of information technology. It a sharp mind and bold action of Mahathir because it is the high risk investment. But he insisted that the information technology is the strategic sector that Malaysia should embrace it from the very beginning. Thanks to Mahathir, Malaysia is now ready to shift from middle income country to the high income through the worker's skills in value added products.

In my opinion Pak Harto deserved Indonesian leader because of his merit to stabilize Indonesia after the politic turmoil. Upbringing as a farmer, Pak Harto succeeded to bring Indonesia self sufficient in rice production. Even he tried to expand paddy field in Central Kalimantan swamp area, but he failed. And However Pak Harto is a leader with vision and he had struggled to realize it. In similar vein Habibie is also our leader. He tried to develop Indonesia by embracing high technology such as aircraft. Even he failed to make profit from all his strategic industries, at least he had a vision and knew what to do for the country.

Does SBY fail? The Idul Fitri celebration will tell the truth

Colonel Adjie Suradji, defiant army officer, might be right about SBY, a feeble general who has no courage to make good for this country. Colonel Adjie has also a good point about courage. It is the respectful character that is praised much by one of American great president, John F Kennedy. In his Pulitzer winning book Profiles in Courage, he quoted Ernest Hemingway that courage is grace under pressure, to portray the courage of 8 US Senators in serving their country. Unfortunately SBY has no courage to solve our problem of enacting law. Apparently SBY let the evil power crush Corruption Eradication Commission by saying that he cannot interfere the police and prosecutor's duty. That's absolutely silly.

Despite courages, the downward of SBY leadership is no great vision. I fully understand that we cannot compare SBY with Pak Harto. Pak Harto has a vision because he has a lot of time to materialize his vision, whereas SBY only has 5 years to do it. However that is not an excuse for SBY because we see that he has many opportunities to show his greatness. We remember Bung Karno as a founding father, Pak Harto for Indonesia's development result, Habibie for his passion for technology. We can forgive Gus Dur and Megawati because they have too little time, but until now we will remember nothing of SBY's 10 year stint.

However the Colonel is absolutely wrong about the paragon of leadership. He took Evo Morales, Hugo Chaves, Ahmadinejad as exemplary leader. Certainly they are brave to defy the American superpower, but they have no strategic action to develop their countries which heavily depend on the wealth of natural resources. Instead of them, the Colonel should mention Deng Xiaoping, Lee Kuan Yew and Mahathir Mohammad.

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Back to the title, does SBY fail?

A friend of mine wrote his status on Facebook. He has compelling case to defend that SBY succeeds in developing this country. He said that should you go to the malls or even the traditional markets then you can see people stampede to buy everything for the Idul Fitri celebration. Without having money we cannot imagine how they can buy.

I told about this to my mother and after coming back from the near market she testified to me that my friend is right. Indonesian people, at least in my hometown do have enough money to buy food and clothes. So thanks to SBY administration people do afford Idul Fitri celebration.

Seeing this I am very upbeat of Indonesian future. We do have a lot of problems: rampant corruption, poor infrastructure, cumbersome bureaucracy, bad law enactment, etc. but until now we survive. We still have positive economic growth, and despite sometimes very disturbing, we can say have stability of democratic country.

Happy Idul Fitri 1431 H!

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Economic Integration First, Then Infrastructure Development

Coordinating Minister of Economic Affairs, Hatta Rajasa was disillusioned with the infrastructure progress of Belawan Port. In 2006, the Infrastructure Summit had decided to improve that port, but until now it takes 6 days to load CPO into 20,000 deadweight ton vessel.

This case shows us that the government is not serious to develop this country's economy in terms of actions not words. We have a good plan or will, but have poorly execution. Given the fact that Indonesia is the world's biggest CPO producer and Belawan is the country's largest CPO seaport, the government wastes this competitive advantage.

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Indonesia ranks 75 out of 155 countries in terms of logistics performance index. The logistics cost 25% GDP while other countries such as Thailand 19%, US 10%, respectively. It is clearly an indication that we have high cost of logistics. Reportedly the shipping of 40-foot container from Padang to Jakarta cost USD 600 while form Jakarta to Singapore will cost USD 185. Unsurprisingly, the China's cheap fruit has been ubiquitous in Indonesia and it seems outnumbering the local fruit. The cow breeders in Lampung get a lower price of Californian corn than of Gorontalo.

There is a network problem to connect the component of goods transportation before assembled. It might be because of cumbersome and corrupted bureaucracy, dishonest government officer and poor network idea and plan.

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There 2 key issues concerning with our not-reflected-the-potential development, namely: economic integration and execution. Economic integration means to have economic output produced and delivered efficiently. It results the soaring price of domestic goods and services production. The success of best planning definitely depends on execution.

However before executing infrastructure, the integration issues have to be addressed first. It includes the issue of economic equity mainly the development of outer Java. It is flabbergasting to see many toll roads are being constructed in already-crowded Java Island despite many alternatives of transportation such as railway.

The government should focus on the economic cluster planning from upstream to downstream in continuous and efficient flow to produce cheaper products. After mapping the material or component flow, it should be followed by the best infrastructure.

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