'Economy still not efficient'<\/p>\n
JAKARTA (JP): Indonesia's most senior economist Sumitro
\nDjojohadikusumo reaffirmed last night the urgent need to reduce
\nthe incremental capital output ratio and the dependency ratio in
\norder to raise the international competitiveness of the
\nIndonesian economy.<\/p>\n
Sumitro told a gathering of thousands of the alumni of the
\nUniversity of Indonesia's Djakarta School of Economics at the
\nConvention Center that Indonesia's economy is still grossly
\ninefficient, citing the latest annual World Competitiveness
\nReport.<\/p>\n
"The 1995 World Competitiveness Report of the Geneva-based
\nWorld Economic Forum puts Indonesia in the 33rd rank among 48
\ncountries covered ...far behind even Malaysia and Thailand, which
\nare in the 21st and 26th rank, respectively," Sumitro noted.<\/p>\n
Indonesia should therefore work harder to improve the
\nefficiency of its economy by reducing its the amount of capital
\ninvestment needed to generate one unit of output, a ratio known
\nby the acronym "ICOR," as well as the dependence ratio of the
\nproductive workers, he said.<\/p>\n
A lower ICOR, he added, would make investments more efficient
\nand effective, therefore strengthening the competitiveness of the
\neconomy.<\/p>\n
Misunderstanding<\/p>\n
On the occasion Sumitro noted what he saw as a
\nmisunderstanding regarding "comparative advantages" and
\n"competitive advantages" in relation to efforts to strengthen the
\ncompetitiveness of the economy.<\/p>\n
In this context, he referred to a report in the Kompas daily
\non Sept.5 which quoted State Minister for Research and Technology
\nB.J. Habibie as saying that "we should zero in on our competitive
\nadvantages and leave out our comparative advantages, which are
\npredicated on cheap manpower."<\/p>\n
He said if the daily's quotation of Habibie's remarks was
\ncorrect, the statement contained a double error -- an error of
\nfact and an error of logic.<\/p>\n
"Forgive me, even though personally I am on excellent terms
\nwith Habibie -- and nowadays ministers cannot make errors and are
\nalways right -- I should speak my mind about the errors of fact
\nand logic," Sumitro said, adding that he found confusing the
\npractice of ministers to talk in different languages.<\/p>\n
"But I also fully realize that under the Pancasila democracy,
\ndifferences of opinion are tolerated," he said.<\/p>\n
Sumitro continued: "I am afraid a double error occurred: an
\nerror of fact and an error of logic."<\/p>\n
Habibie's statement contained an error of fact because
\ncomparative advantage is not identical with the employment of
\ncheap labor, Sumitro said.<\/p>\n
The economic theories on comparative advantage conceived
\nfirst by economist David Ricardo, then by Heckscher and Ohlin
\nHaberler, clearly hold that the pattern of comparative advantage
\nby itself depends on the interaction among the factors of
\nproportions, such as resource endowments, technology, Sumitro
\nsaid.<\/p>\n
The error of logic in Habibie's statement lies in the fact
\nthat in order to increase the competitive advantage a country
\nneed not, a priori, disregard economic activities based on
\ncomparative advantage.<\/p>\n
"The real issue is how can we deploy our given comparative
\nadvantage to improve the efficiency of our national economy so as
\nto strengthen the competitive edge of our economy," he added.<\/p>\n
Therefore, the problem is not "either\/or," he said. Rather,
\nthe two kinds of advantages should be developed simultaneously in
\norder to complement and strengthen each other, according to
\nSumitro.<\/p>\n
In contrast to his previous public speeches, which have always
\nbeen well-prepared and well-structured, Sumitro spoke from only
\nbrief notes last night.<\/p>\n
His speech included a number of wide digressions and asides,
\nat one point addressing the subject of democracy.<\/p>\n
According to Sumitro, one of the two main prerequisites for
\nthe development of democracy is a high degree of tolerance of
\ndifferences of opinions.<\/p>\n
"Another prerequisite is that those who issue regulations
\nor directives should be the first to honor those rules," Sumitro
\nadded. (rid\/vin)<\/p>",
"url": "https:\/\/jawawa.id\/newsitem\/economy-still-not-efficient-1447893297",
"image": ""
},
"sponsor": "Okusi Associates",
"sponsor_url": "https:\/\/okusiassociates.com"
}