Asia-Pacific enjoys new growth
Asia-Pacific enjoys new growth
This is the second of two articles based on a paper presented
by State Minister for National Development Planning/Chairman of
Bappenas Ginandjar Kartasasmita at a seminar organized by The
Jakarta Post and the Asia Pacific Economics Group.
JAKARTA: We in Indonesia are confident of our ability to
compete, take advantage of opportunities, and deal with the
problems these activities create. Our confidence is based on a
number of things.
First, there is our track record. With export growth averaging
above 15 percent and real GDP growth consistently over 7 percent,
we have demonstrated our competitive ability over the last seven
years. We have multibillion dollar exports in untraditional areas
ranging from textiles to plywood, to more recent exports in the
areas of shoes, furniture, electronics, chemicals and pulp and
paper. And new areas arise continuously.
It appears, from Indonesia, that a new wave of industrial
restructuring is taking place in East Asia. With this
restructuring and liberalized policies in trade and investment we
are seeing domestic and foreign investment approvals at rates
never seen before.
Much of our existing industrial capital is new. As
industrialization proceeds, we are fortunate that new capital can
be placed in highly competitive sectors compatible with the new
world economic system being ushered in by the World Trade
Organization and the Asia Pacific Economic Cooperation forum. Our
industrial annual growth rate of more than 12 percent will
facilitate restructuring. The demand for industrial labor is
growing rapidly as labor productivity increases equally quickly.
Our planning for the next five and 25 years is set in the
context of these global and domestic trends. In the last two
years our economy has grown at 7.5 percent and 8 percent and we
anticipate being able to maintain an average of 7 percent growth
for the rest of our long-term plan .
With this growth we expect to quadruple real incomes in 25
years. By 2018 we will have an economy close to US$1 trillion in
1993 dollar terms and almost double that in purchasing power
parity terms. Such figures would make Indonesia the fifth or
sixth largest economy in the world.
Like the rest of the region, this growth will literally
transform the country. Our strategy emphasizes using our
comparative and competitive advantage in industrial areas as the
main source of growth. Even now the industrial sector has reached
almost a quarter of the economy and its share is increasing
rapidly. Since the economy will be so much larger then this
industrial sector will be correspondingly deeper and wider than
what we have today. This industrial transformation will be
accompanied by an equally momentous shift of the Indonesian
population from rural to urban areas.
It is estimated that today's urban population of 65 million
(or 35 percent of the population) will grow to 155 million people
(60 percent) by 2018. Simple arithmetic indicates that this is
equivalent to the number of new urban dwellers increasing by
between two to three million people every year over this period.
Thus the Indonesia of the future will have more urban dwellers
(with many more living in apartments), more people working in
high-skilled intensive factories and a larger and more
professionally oriented service sector.
The large number of people working in the industrial sector in
urban areas will reduce the population pressure in rural areas
and make the remaining farmers more productive and able to afford
more capital-intensive farming techniques. In other words the
rural areas will also become a vast and growing market for
industrial products and thereby support the industrial
transformation.
We also anticipate that our current policy initiatives for
small and medium firms will pay off in an increasingly dynamic
industrial structure. Such a structure should be comprised of
foreign (or mixed ownership) firms, their large domestic
competitors (competing both here and abroad) and a multitude of
efficient, modern smaller companies that are the seedbed of new
generations of firms. With this transformation the middle class
should become the backbone of our maturing economy.
In fact, our development strategy puts an increased emphasis
on human development through increased investment in education
and health designed to raise welfare and income by providing
better educated and healthier workers, managers, professionals
and entrepreneurs.
Another key to our development strategy is providing critical
infrastructure, which in the global and regional perspectives I
have commented upon earlier. Infrastructure shortfalls have
created a number of critical shortages that we must work to
correct. This is an area where we have moved to consolidate our
partnership with the private sector.
The demands on the government in social infrastructure areas
(education, health, etc.), and in conventional infrastructure
areas with limited direct profitability (local roads, sanitation,
etc.) are straining our financing capabilities. In addition, we
have come to appreciate that the private sector, effectively
regulated, can often provide services more efficiently that were
traditionally provided by the government. Thus in
telecommunications, power generation, toll roads, and other areas
we have begun to contract out major infrastructure projects.
We also know that high growth does not automatically translate
into equal opportunities for all and, in fact, people with more
education, located closer to economically dynamic areas, or with
other advantages are in a better position to take advantage of
improved conditions than those living in less fortunate
circumstances.
For instance, recent manufacturing investment has been too
concentrated on Java, both limiting the ability of other regions
to achieve their potential and creating environmental stress on
Java itself. While rapid growth often raises incomes, at the same
time inequality can grow, and sometimes rapidly. To maintain the
growth momentum with the minimum threat to stability, the
government must address these problems. The government will use
its regulatory and spending powers to increase opportunities for
regions and groups left behind, to help them attain their
economic potential.
May I conclude by restating my thesis that the forces behind
globalization and world-wide restructuring are much stronger
than, and earlier than, recent institutional developments.
Changing capabilities and costs have made it possible to produce
goods anywhere for markets located anywhere in the world. This
technological revolution has forever raised our awareness and
access to each other's resources and markets. Rising awareness
and access have increased investment, trade and growth --
especially in our region where policy and the political climate
have been accommodating.
In Indonesia, we are gearing ourselves to meet the promises of
the future by steadily opening up our economy to international
competition and foreign investment.
Window: Indonesia in the future will have more urban dwellers,
more people working in modern skill intensive factories and a
larger and more professionally oriented service sector.