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.
Japan is the best example of slow-growth-does-not-matter. Since 2000, Japan economy is stagnant indicated with tiny economic growth. But it does not really hurt Japan's economy. Certainly there is no starvation in Japan caused by its sluggish economy. The already-high GDP will result in the high level income per capita, let alone Japan experiences shrinking population.
However Indonesia is a different story. Indonesia's income per capita is one third of Malaysia. If we assume there is no growth of population in both countries and no growth in Malaysia, Indonesia must have 300% of GDP growth to elevate the same level of Malaysia's prosperity. If we assume Indonesia's economic growth 10% and Malaysia 0%, it takes 12 years to outperform Malaysia. And if Malaysia has 3% growth then it takes 17 years.
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During economic crisis 2008-2009, Indonesian government including Sri Mulyani boasted its economic resilience knowing all countries, except China and India, experienced negative growth or shrinking economy. Thanks to government spending, biggest market and its disconnection to world economy, Indonesia can survive from economic crisis. The Indonesia's economic growth is mainly pulled by non-tradable sector. Other countries negative growth happened due to the slowing European and American market demand. They depend highly on export.
Now the world economy has been recovery. The truth of economy fundamentals appear. In 2010, Semester I, Indonesia is slated as the slowest growth economy in the region. Singapore which slapped by 10% negative growth during the crisis, comes up with its real strength by the highest growth of 18.8%. Taiwan's GDP grows 12.5%, China 10.3, Thailand 9.1%, Malaysia 8.9%, India 8.8%, The Philippines 7.3%, South Korea 7.2% and Indonesia 6.2%.
The data shows that Indonesia lags behind other countries in terms of connecting its economy to the rest of the world. In the wake of economic recovery as the world begins to consume electronics products, buy cars, go abroad for pleasure, Indonesia get less benefit. We produce less added value products than other countries.
Indonesia should restructure its economy. Indonesia should focus to develop its more added value industry that can be sold across the world.
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