Indonesia warned of emerging competitors

By Rikza Abdullah

KUALA LUMPUR (JP): U.S. economists warned yesterday that Indonesia may lose out in competition with other developing nations if it fails to continue reducing its bureaucracy, monopolies and costs.

"Competition in attracting foreign investments is getting more intense with the opening of trade and investment in a number of developing countries," said Jeffery Sachs, the author of Global Linkages and a professor of international trade at Harvard University.

Sachs was one of the speakers at a two-day conference, which ended here yesterday, on "Global Asia: Reengineering for Competitive Advantage". The meeting was organized by the Hong Kong-based magazine Far East Economic Review. The other speakers were Malaysian Deputy Prime Minister Anwar Ibrahim, Edgardo J. Angara, the senate president of the Philippines, Amnuay Viravan, the leader of the Nam Thai Party of Thailand, and George Yip, the author of Total Global Strategy and an adjunct associate professor in the Anderson Graduate School of Management of the University of California in Los Angeles.

Sachs told the meeting that Indonesia is a developing country with one of the fastest economic growths -- of over five percent per annum -- since the 1970s due to its market-oriented economic policies.

"The high economic growth, stability in economy and politics, abundant natural resources and low labor costs have made Indonesia attractive to foreign investors," he said. "But a country like India, which has been opening up its economy, may become more attractive because it has a bigger population and more people with high intellectual capability."

Restrictions

Sachs suggested that Indonesia reduce restrictions for foreign investors, gradually reduce the role of state companies, lower taxation and allow more competition by reducing the number of monopolies and protectionist measures.

Indonesia should also improve its education systems to accelerate the development of human resources, which are very important for its economic development, he said.

George Yip said that Indonesia also should accelerate the development of its infrastructure, including telecommunications, electricity, ports, roads and airports, to make it more reliable.

"The Indonesian government also should make its institutions easier to deal with," he told The Jakarta Post" later.

He commented that Indonesia's bureaucratic procedures are too heavy.

Yip also suggested that Indonesian companies take measures to improve their advantages against overseas competitors.

Indonesian companies can improve their capability to outrun foreign rivals through more exposure to global competition, learning from business partners from developed countries and professionalizing managers, he said.

Sachs said that the succession of leadership in Indonesia is unlikely to affect its competitiveness because the established system of political leadership succession will guarantee stability, which has already been preserved for a long period of time.

Human rights issues, which have been discussed in several places in the world, are also unlikely to affect the attractiveness of Indonesia to foreign investors, he added.

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