Asia-Pacific enjoys new growth<\/p>\n
This is the second of two articles based on a paper presented
\nby State Minister for National Development Planning\/Chairman of
\nBappenas Ginandjar Kartasasmita at a seminar organized by The
\nJakarta Post and the Asia Pacific Economics Group.<\/p>\n
JAKARTA: We in Indonesia are confident of our ability to
\ncompete, take advantage of opportunities, and deal with the
\nproblems these activities create. Our confidence is based on a
\nnumber of things.<\/p>\n
First, there is our track record. With export growth averaging
\nabove 15 percent and real GDP growth consistently over 7 percent,
\nwe have demonstrated our competitive ability over the last seven
\nyears. We have multibillion dollar exports in untraditional areas
\nranging from textiles to plywood, to more recent exports in the
\nareas of shoes, furniture, electronics, chemicals and pulp and
\npaper. And new areas arise continuously.<\/p>\n
It appears, from Indonesia, that a new wave of industrial
\nrestructuring is taking place in East Asia. With this
\nrestructuring and liberalized policies in trade and investment we
\nare seeing domestic and foreign investment approvals at rates
\nnever seen before.<\/p>\n
Much of our existing industrial capital is new. As
\nindustrialization proceeds, we are fortunate that new capital can
\nbe placed in highly competitive sectors compatible with the new
\nworld economic system being ushered in by the World Trade
\nOrganization and the Asia Pacific Economic Cooperation forum. Our
\nindustrial annual growth rate of more than 12 percent will
\nfacilitate restructuring. The demand for industrial labor is
\ngrowing rapidly as labor productivity increases equally quickly.<\/p>\n
Our planning for the next five and 25 years is set in the
\ncontext of these global and domestic trends. In the last two
\nyears our economy has grown at 7.5 percent and 8 percent and we
\nanticipate being able to maintain an average of 7 percent growth
\nfor the rest of our long-term plan .<\/p>\n
With this growth we expect to quadruple real incomes in 25
\nyears. By 2018 we will have an economy close to US$1 trillion in
\n1993 dollar terms and almost double that in purchasing power
\nparity terms. Such figures would make Indonesia the fifth or
\nsixth largest economy in the world.<\/p>\n
Like the rest of the region, this growth will literally
\ntransform the country. Our strategy emphasizes using our
\ncomparative and competitive advantage in industrial areas as the
\nmain source of growth. Even now the industrial sector has reached
\nalmost a quarter of the economy and its share is increasing
\nrapidly. Since the economy will be so much larger then this
\nindustrial sector will be correspondingly deeper and wider than
\nwhat we have today. This industrial transformation will be
\naccompanied by an equally momentous shift of the Indonesian
\npopulation from rural to urban areas.<\/p>\n
It is estimated that today's urban population of 65 million
\n(or 35 percent of the population) will grow to 155 million people
\n(60 percent) by 2018. Simple arithmetic indicates that this is
\nequivalent to the number of new urban dwellers increasing by
\nbetween two to three million people every year over this period.
\nThus the Indonesia of the future will have more urban dwellers
\n(with many more living in apartments), more people working in
\nhigh-skilled intensive factories and a larger and more
\nprofessionally oriented service sector.<\/p>\n
The large number of people working in the industrial sector in
\nurban areas will reduce the population pressure in rural areas
\nand make the remaining farmers more productive and able to afford
\nmore capital-intensive farming techniques. In other words the
\nrural areas will also become a vast and growing market for
\nindustrial products and thereby support the industrial
\ntransformation.<\/p>\n
We also anticipate that our current policy initiatives for
\nsmall and medium firms will pay off in an increasingly dynamic
\nindustrial structure. Such a structure should be comprised of
\nforeign (or mixed ownership) firms, their large domestic
\ncompetitors (competing both here and abroad) and a multitude of
\nefficient, modern smaller companies that are the seedbed of new
\ngenerations of firms. With this transformation the middle class
\nshould become the backbone of our maturing economy.<\/p>\n
In fact, our development strategy puts an increased emphasis
\non human development through increased investment in education
\nand health designed to raise welfare and income by providing
\nbetter educated and healthier workers, managers, professionals
\nand entrepreneurs.<\/p>\n
Another key to our development strategy is providing critical
\ninfrastructure, which in the global and regional perspectives I
\nhave commented upon earlier. Infrastructure shortfalls have
\ncreated a number of critical shortages that we must work to
\ncorrect. This is an area where we have moved to consolidate our
\npartnership with the private sector.<\/p>\n
The demands on the government in social infrastructure areas
\n(education, health, etc.), and in conventional infrastructure
\nareas with limited direct profitability (local roads, sanitation,
\netc.) are straining our financing capabilities. In addition, we
\nhave come to appreciate that the private sector, effectively
\nregulated, can often provide services more efficiently that were
\ntraditionally provided by the government. Thus in
\ntelecommunications, power generation, toll roads, and other areas
\nwe have begun to contract out major infrastructure projects.<\/p>\n
We also know that high growth does not automatically translate
\ninto equal opportunities for all and, in fact, people with more
\neducation, located closer to economically dynamic areas, or with
\nother advantages are in a better position to take advantage of
\nimproved conditions than those living in less fortunate
\ncircumstances.<\/p>\n
For instance, recent manufacturing investment has been too
\nconcentrated on Java, both limiting the ability of other regions
\nto achieve their potential and creating environmental stress on
\nJava itself. While rapid growth often raises incomes, at the same
\ntime inequality can grow, and sometimes rapidly. To maintain the
\ngrowth momentum with the minimum threat to stability, the
\ngovernment must address these problems. The government will use
\nits regulatory and spending powers to increase opportunities for
\nregions and groups left behind, to help them attain their
\neconomic potential.<\/p>\n
May I conclude by restating my thesis that the forces behind
\nglobalization and world-wide restructuring are much stronger
\nthan, and earlier than, recent institutional developments.
\nChanging capabilities and costs have made it possible to produce
\ngoods anywhere for markets located anywhere in the world. This
\ntechnological revolution has forever raised our awareness and
\naccess to each other's resources and markets. Rising awareness
\nand access have increased investment, trade and growth --
\nespecially in our region where policy and the political climate
\nhave been accommodating.<\/p>\n
In Indonesia, we are gearing ourselves to meet the promises of
\nthe future by steadily opening up our economy to international
\ncompetition and foreign investment.<\/p>\n
Window: Indonesia in the future will have more urban dwellers,
\nmore people working in modern skill intensive factories and a
\nlarger and more professionally oriented service sector.<\/p>",
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