On RI’s Economic Growth

RI is touted by the government and foreign analysts for its impressive economic growth. RI has seen relatively high economic growth for years. This is not small feat bearing in mind this is happening amid the world’s economic crisis. It seems reforms era to be carrying off the economy. But does this lap up by the people?

Certainly, economic growth is good. It does create jobs. Regrettably, the structure of RI’s economy does not allow the Indonesians to attain the highest degree of opulence. The observation of what and how goods and services which are made in Indonesia buttress this proposition.

The foreigners rule the roost in our economy, since RI has not managed to spawn industries with high added value products. No Sony, Samsung, IKEA, Nexian, let alone Google are groomed in Indonesia. This places RI as consumer of world’s products, not producer. And this is not good economic structure.

The economy still grows positively through the increase of domestic consumption, investment, government spending and export. And the calculation shrugs off who create them. When Freeport, the America-based company, mines and exports more copper and gold or the prices of both commodities are high, this will automatically contribute to RI’s economic growth. It is much as Japanese Toyota, Honda, Suzuki with cars and motorcycles sales in domestic market or abroad or Malaysia’ Guthrie with palm oil. In these cases, economic growth benefits much the foreigners.

Certainly, the Indonesians get benefit too. Thanks to some multi-national companies who establish their factories here, so that the Indonesian white and blue collar workers can have jobs and enjoy good salaries. The multiplier effect can also create jobs in other sectors such as logistics, food and beverage, transportation, housing, etc. And in mining sector the government took a fraction of foreigners’ profit as its revenue.

But nothing is to blame the foreign investors. Their interest is to naturally make scads of money and RI needs them to boost economy. The system has been agreed upon through globalization. Foreigners hold no responsible for RI’s good economic structure which requires more locally-made added value products.

Accordingly the schlock economic growth can mislead the conclusion of country’s development. Further observation to the likes of South Korea, Taiwan, China and India confirms that their success is based on creating goods and services with high added value and exporting them all over the world. And those countries have produced a cornucopia of innovative companies.

RI must address the issue at a drop of a hat, because another development obstacle is waiting ahead. Development without enough added value products will stuck at certain level of income. At present RI is still growing on grounds of advantage of low salary workers and abundant natural resources reserves. And this does not last forever. When other countries offer the cheaper salary, good infrastructure for foreign investment and RI’s natural resources deplete, the growth peters out. It is dubbed as middle income trap.  

To get around this trap and to ensure having robust economy and high quality of economic growth, RI should strengthen human resources through education and rule of law combined with incentives that encourage enterprises to whip up innovations so that RI’s products overwhelm the world.

* * * * *