Indonesia was
often mentioned as an appropriate candidate to be included in the BRIC
countries (Brazil, Russia, India and China). Another set of emerging economies
- grouped under the acronym CIVETS (Colombia, Indonesia, Vietnam, Egypt, Turkey
and South Africa) - also gained attention as its members have reasonably
sophisticated financial systems and fast-growing populations. Several years ago
the combined gross
domestic product (GDP) of the CIVETS was predicted to account
for half the global economy by 2020. However, since the prolonged global
economic slowdown after 2011 we rarely hear the terms BRIC and CIVETS anymore.
Another
important example of international recognition regarding Indonesia's economy
are the recent upgrades of the country's credit[1]
ratings by international financial services companies such as Standard &
Poor's, Fitch Ratings and Moody's. Resilient economic growth, low government
debt and prudent fiscal management have been cited as reasons for the upgrades
and are key in attracting financial inflows into Indonesia: both portfolio
flows and foreign direct investment (FDI). These FDI inflows, which had been
relatively weak for Indonesia during the decade after the Asian
Financial Crisis had seriously shaken up the foundations of the
country, showed a steep increase after the global financial crisis of 2008-2009
(although somewhat weakening after 2014 due to Indonesia's prolonged economic
slowdown in the years 2011-2015).
Although
Indonesia is eager to reduce its traditional reliance on raw commodity exports
and boost[2] the manufacturing industry (for example through the
2009 New Mining Law), it is a difficult path particularly because the private sector
remains hesitant to invest. This transformation is important because
falling commodity prices after 2011 (which are the result of stalling economic
growth of China) has impacted drastically on Indonesia. Indonesia's export
performance weakened significantly, implying fewer foreign exchange earnings
and reduced purchasing power, hence causing an economic slowdown.
The Indonesian
government under the leadership of Joko Widodo (who was inaugurated as
Indonesia's seventh president in October 2014) has implemented[3] several structural reforms that aim at long-term
growth but cause some short-term pain. For example, the majority of fuel
subsidies have been scrapped successfully, a remarkable accomplishment (as fuel
subsidy cuts have always caused outrage among the population) aided by the
globe's low crude oil prices. Moreover, the government places high priority on
infrastructure development (evidenced by the sharply rising government
infrastructure budget) and on investment (evidenced by deregulation and fiscal
incentives that are offered to private investors).
But back to the
basics: what are Indonesia's strengths that explain structural[4] macroeconomic growth?
Indonesia is a
market economy in which the state-owned enterprises (SOEs) and large private
business groups (conglomerates) play a significant role. There are hundreds of
diversified privately-held business groups in Indonesia (a tiny fraction of the
total amount of companies active in Indonesia) that - together with the SOEs -
dominate the domestic economy. As such, wealth is concentrated at the top
of society (and not unoften there are close links between the corporate and
political top of the country).
Indonesia’s
micro, small and medium sized enterprises, which together account for 99
percent of the total amount of enterprises that are active in Indonesia, are
important too. They account for about 60 percent of Indonesia’s gross
domestic product (GDP) and create employment to
nearly 108 million Indonesians. This implies that these micro, small and medium
sized companies are the backbone of the Indonesian economy.
There are signs
that Indonesia's economic growth is starting to accelerate again after the
economic slowdown in the years 2011-2015. As such we may be at the beginning of
what can become another period of substantial economic growth. However, it
should also be pointed out that Indonesia is a complex country that contains
certain risks for investments and experiences difficulties due to the nation's
unique dynamics and context. In order to be aware of the risks involved we
advise you to read our Risks of
Investing in Indonesia section and to keep track of Indonesia's
latest economic, political and social developments through our News section, Business
section and Finance
section.
WORD
|
V
|
n
|
Adj.
|
Adv.
|
Credit
|
Credit
|
Credit
|
-
|
-
|
PHONETIC
|
MEANING
|
to pay money into a bank account
|
money in your bank account.
|
-
|
-
|
US
|
UK
|
/ˈkred.ɪt/
|
/ˈkred.ɪt/
|
EXAMPLE
|
They credited my account with $20 after I pointed out the
mistake.
|
Now I've paid in that cheque, I'm in credit again.
|
-
|
-
|
WORD
|
V
|
n
|
Adj.
|
Adv.
|
boost
|
boost
|
boost
|
-
|
-
|
PHONETIC
|
MEANING
|
to improve or increase something.
|
the act of boosting something.
|
-
|
-
|
US
|
UK
|
/buːst/
|
/buːst/
|
EXAMPLE
|
More money is needed to boost the industry.
|
The city will get a real boost if its Olympic bid
is successful.
|
-
|
-
|
WORD
|
V
|
n
|
Adj.
|
Adv.
|
implemented
|
implement
|
implementation
|
-
|
-
|
PHONETIC
|
MEANING
|
to start using a plan or system.
|
the act of starting to use a plan or system.
|
-
|
-
|
US
|
UK
|
/ˈɪm.plə.ment/
|
/ˈɪm.plɪ.ment/
|
EXAMPLE
|
Their reports were only partly implemented.
|
The keys to the successful implementation of the project have
been simplicity and communication.
|
-
|
-
|
WORD
|
V
|
n
|
Adj.
|
Adv.
|
structural
|
structure
|
structure
|
structural
|
|
PHONETIC
|
MEANING
|
to plan, organize, or arrange the parts of
something
|
the way in which the parts of a system or object are arranged
or organized, or a system arranged in this way
|
relating to the way in which parts of a
system or object are arranged
|
|
US
|
UK
|
/ˈstrʌk.tʃɚ.əl/
|
/ˈstrʌk.tʃər.əl/
|
EXAMPLE
|
We must carefully structure and rehearse each
scene.
|
They have a very old-fashioned management structure.
|
A structural engineer.
|
|
