Low business competitiveness hampering economic growth
The Jakarta Post, Jakarta
Instead of boasting so much about the current macroeconomic stability, the government should turn its focus on improving business competitiveness in the country in order to generate higher economic growth, a respected think thank has said.
The Institute for the Development of Economics and Finance (Indef) said that business competitiveness here was among the lowest in the world.
"Improvement in macroeconomic indicators have yet to form the basis for economic recovery," it said last week when announcing its latest study on business competitiveness.
Indef said that after securing a stable exchange rate of the rupiah and a benign inflation environment, the government must speed up efforts to resolve problems faced by the corporate sector and foreign investors.
It said that the poor business competitiveness was one of the main reasons for the country's weak performance in export and investment, seen as key elements for generating solid economic growth.
Quoting various international surveys, Indef said Indonesia's economy was ranked among the lowest in the world in terms of competitiveness and has gotten worse.
Indef cited six indicators that have weakened the country's competitiveness on the global level.
There is a lack of up-to-date technology in the manufacturing industry, insufficient infrastructure, weak law enforcement, a lack of effectiveness and transparency in the government's policies, weak implementation of good corporate governance principles and high risks with regard to economic and political stability.
All of which have added to the problems in the country's microeconomy, already regarded as less competitive compared to most others, mainly because of all the extra costs in doing business here.
Aside from rampant illegal fees from corrupt officials, Indef highlighted a survey suggesting that higher business costs in Indonesia, were caused also by inefficiency.
Indef pointed out, as an example, the higher cost of an international telephone call, as compared to Malaysia, Singapore and South Korea.
Indef said that if the above factors did not improve, Indonesia would never experience the type of economic growth that is not only sustainable, but also at a high enough level to reduce unemployment and poverty.
"If we keep growing by just 3 percent to 4 percent per year, we will only absorb some 1.2 million new workers a year, and leave the remainder of around 1.3 million jobless each year," Indef said.
In its conclusion, Indef proposed a number of measures that the government could do to change the current situation for the better.
They include: focusing on the development of the agribusiness sector and other natural resource-based industries, the development of high value-added trade and industry sectors, revitalization of infrastructure, speeding up the restructuring of the weak banking industry, and creating more effective regional administrations.
Macroeconomy competitiveness 2002 _________________________________________________ Country Growth Technology Public
Competitiveness Institution _________________________________________________
Malaysia 27 26 33 Thailand 31 41 39 China 33 63 38 India 48 57 59 Philippines 61 52 70 Argentina 63 44 66 Viet Nam 65 68 62 Indonesia 67 65 77 Nigeria 71 71 78 Bangladesh 74 79 79 --------------------------------------------------- Source: World Economic Forum, Indef, 2003
Microeconomy Competitiveness 2002 _______________________________________________________________________ Contry Microeconomic Company Quality of National
Competitiveness Operations BusinessEnvironment
& Strategy ________________________________________________________________________ Malaysia 26 27 26 Thailand 35 33 35 India 37 40 37 China 38 38 38 Viet Nam 60 67 58 Philippines 61 49 67 Indonesia 64 65 68 Argentina 65 57 68 Nigeria 71 71 71 Bangladesh 74 76 74 ------------------------------------------------------------------------ Source: World Economic Forum, Indef, 2003