Are businesspeople ready for globalization?

Are businesspeople ready for globalization?

By Aleksius Jemadu

BANDUNG (JP): As we approach the end of the 20th century,
mounting awareness and concern about our international
competitiveness seems to increase. We may never fully understand
the meaning of the concept of international competitiveness. Yet,
as a matter of fact, this concept has become a familiar slogan of
politicians and government leaders aspiring to rally support for
greater national efforts in succeeding in the global economy.

Questions about international competitiveness have become a
regular part of public discourse in Indonesian domestic and
foreign economic policies. Has Indonesia lost competitiveness to
other ASEAN countries, like Malaysia, Thailand, Singapore, the
Philippines, and Vietnam? How much protection should the
government give to local private corporations so that they may
not lose their competitiveness with their foreign competitors? To
what extent are our political and economic structures suitable
for global competition?

A nation is said to have a high degree of competitiveness if
"it can, under free and fair market conditions, produce goods and
services that meet the tests of international markets while
simultaneously expanding the real incomes of its citizens" (David
P. Rapkin and Jonathan R. Strand, 1996).

This definition consists of three variables: conditions in a
country's export markets, the ability to produce and sell goods
and services in those markets, and the real incomes, or standard
of living, of its citizens.

This article attempts to analyze the suitability of our
political and economic structures for a free trade era and
economic globalization. It should be noted that economic
liberalization at a global level requires progressive
transformation from a traditional organization of economic life
into a modern one. This transformation involves the creation of a
progressive sector in the economy which is characterized by a
high level of productive efficiency and economic integration.

There are three forces at work in the process of making the
Indonesian economy more competitive in the international market.
The three forces are economic, organizational or institutional,
and technological. The economic factor includes the basic
characteristics of our macroeconomic policies. As far as
international trade is concerned, the bottom line of our economic
policies has been the expansion of our non-oil exports. So far
government's priority has been to create a conducive atmosphere
for the expansion of manufacturing industries and to make them
highly competitive at a regional as well as global level. The
government has spent a considerable amount of investment to
advance communications and transportation in order to reduce
transactional costs.

There is, however, a concern about the fact that the
Indonesian economy has increasingly become high-cost. We have to
get rid of a rent-seeking economy if we want to increase the
efficiency of our economy. It is often said that our national
entrepreneurs are overburdened with illegal payments to
government officials to the effect that they are compelled to
increase their profit margin by raising the price of their
products. This in turn creates an extra burden for domestic
consumers because they have to cope with the ever-increasing
price of consumer goods. At an international level, Indonesian
products could have been more competitive without such
irregularities in dealing with government bureaucracies.

Another element in the process of price formation is the
salary of industrial workers. There is an increasing tendency
that our industrial workers want a bigger share from the
expansion of our national economy. The government is now under
constant pressure to increase regional minimum wage so that
laborers can cope with an urban standard of living. There is also
growing pressure from Western leaders and international
organizations that Indonesia should improve its record in taking
care of the social and economic welfare of its laborers. Indeed,
the form of state-society relations (linking government,
business, and labor) influences a country's capacity to compete
with its neighbors.

The role of businesspeople in expanding our international
market share is obviously indispensable. Entrepreneurship
combined with skills in trade negotiations and a good command of
foreign languages (especially English which inevitably has become
the language of the global market) should be promoted. In this
regard the role of business associations is critical. In some
cases the government can also intervene by creating a supporting
atmosphere for national entrepreneurs to grow in. Unfortunately,
most of our conglomerates are said to have grown not so much by
their skill in business but rather by their close connections to
the political elite.

The fact that a merit system is not determinant in the general
evolution of Indonesian entrepreneurship should make us worry
about the preparedness of some of our conglomerates in coping
with highly competitive international traders. So far some
conglomerates have survived and have even grown bigger because
they have had an ensured domestic source of appropriation.
Sustained economic growth over the last three decades has helped
create a bigger market for consumer goods. To some extent
Indonesian conglomerates have been tremendously benefited by this
achievement.

The experience of South Korea in nurturing the growth of its
conglomerates teaches Indonesia a good lesson. When South Korea
started its process of industrialization in the 1960s under
President Park Chung-hee, South Korean infant industries were
highly protected. However, in the 1980s, South Korean business
groups began to grow and expand on their own. And now they are
highly regarded by their counterparts in industrialized
countries.

What we can learn from South Korea is the way it
institutionalized its "national systems of innovation", defined
as "the network of institutions in the public and private sectors
whose activities and interactions initiate, import, modify and
diffuse new technologies" (Freeman, 1987).

A network approach should be promoted in improving our
international competitiveness. Through a network the government
and the private sector can build mutual trust and interdependence
in overcoming all obstacles in international trade. If our
domestic political and economic structures are not part of the
solution to the problem, then they become increasingly part of
the problem itself. Hopefully not.

The writer is a lecturer at the Faculty of Social and
Political Sciences at Parahyangan University, Bandung.