Utterly uncompetitive<\/p>\n
With extensive practices of bad governance, poor-quality
\ninstitutions and highly inimical business environments, Indonesia
\npredictably ranked very low in both indices of the Global
\nCompetitiveness Report 2003 which was prepared and issued by the
\nGeneva-based World Economic Forum last Thursday.<\/p>\n
Even though Indonesia scored significant improvement in the
\ncategory of macroeconomic environment, it miserably declined to
\n72nd place, from 66th rank, in the growth competitiveness index,
\nbut rose slightly to 58th place from 64th in the business
\ncompetitiveness index.<\/p>\n
However, Indonesia's overall rankings should be set against
\nthe new perspective in that the number of countries surveyed for
\nthe 2003 report increased to 102 from 80 last year. But even
\namong the larger number of countries, Indonesia's overall
\nperformance remained miserably poor and was in fact, the worst
\namong the six ASEAN countries covered by the survey.<\/p>\n
Indonesia, according to the report, made the 5th biggest
\nimprovement in its macroeconomic environment score, marked mainly
\nby a dramatic decrease in the area of government wasteful
\nspending.<\/p>\n
However, efficient government expenditure and the ratio of the
\npublic sector's expenditure to gross domestic product is only one
\nof the many factors assessed in the area of macroeconomic
\nenvironment, which itself is only one of three main components
\n(pillars) analyzed in drawing the growth competitiveness index.<\/p>\n
Indonesia performed very poorly in the other two main
\ncomponents -- the quality of public institution and the usage of
\ntechnology. The quality of public institution is quite vital for
\neconomic competitiveness because businesses have to deal with
\ninstitution either for law enforcement, which is crucial for the
\nrunning of a market economy, licensing and other regulatory
\nrequirements.<\/p>\n
Both indices of the report which measure the levels of growth
\nand business competitiveness are actually interrelated in that a
\ncountry's scores or ranks in both indices are never wide apart.
\nHence, Indonesia ranked very low both in the growth and business
\ncompetitiveness indices.<\/p>\n
The inter-relationships are simply rational because, as the
\nreport argues, even though stable political, legal and social
\ninstitutions and sound macroeconomic policies create the
\npotential for improving national prosperity, wealth is actually
\ncreated at the microeconomic level, in the ability of companies
\nto efficiently create valuable goods and services.<\/p>\n
Along the line of this thought is that macroeconomic policies
\nthat are conducive for investment will not lead into higher
\nproductivity if microeconomic policies do not encourage the right
\nkind of investment, do not stimulate the creation of company
\nskills and the establishment of supporting industries and good
\ncorporate governance practices.<\/p>\n
The three pillars of the growth competitiveness --
\nmacroeconomic environment, public institution and usage of
\ntechnology with their respective myriads of subcomponents --
\ngreatly influence the two main components that measure the level
\nof business competitiveness: The sophistication of company
\noperations and strategy and the quality of national business
\nenvironment.<\/p>\n
The competitiveness -- meaning productivity -- of a country is
\nultimately determined by the productivity of its business units.
\nAn economy can never be competitive if its business units are not
\nhighly productive, but the productivity of firms is inter-wined
\nwith the quality of the national business environment.<\/p>\n
As Indonesia's overall business environment is highly inimical
\nto productivity, the level of its business competitiveness has
\nbeen very low even though its comparative advantages -- natural-
\nresource endowments and large pool of low-cost labor -- are very
\nbig.<\/p>\n
The report rightly suggests that companies must shift from
\ncompeting on comparative advantages to competing on competitive
\nadvantages arising from superior products and processes, if
\nsuccessful economic development is to occur.<\/p>\n
The Global Competitiveness Report once again reaffirms the
\ngreat importance of microeconomic reform. This message should be
\na reminder to the Indonesian government to push ahead with the
\nlong list of structural reform stipulated in the White Paper on
\nthe new reform agenda to replace the International Monetary Fund
\nprogram later this year.<\/p>\n
Without these structural reform growth will be debilitated as
\nthe economy will suffer double blows from falling exports (lower
\nexternal demand) and depressed demand from the domestic market
\ncaused by high unemployment and stagnant wages.<\/p>",
"url": "https:\/\/jawawa.id\/newsitem\/utterly-uncompetitive-1447893297",
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"sponsor": "Okusi Associates",
"sponsor_url": "https:\/\/okusiassociates.com"
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