Editorial

A worker resting in front of an apartment project banner in Kuningan, Jakarta, on Tuesday. (Photo: Safir Makki, JG)

Fueling Indonesia’s Economic Engine

It is not often that Indonesia ranks above nations such as the United States, Germany and Britain in an economic competitiveness survey, but it achieved this milestone in the latest IMD World Competitiveness Center study.

The Switzerland-based think tank, in its 2009 World Competitiveness Yearbook, points out the significant improvement in Indonesia’s competitiveness ranking. The nation moved up nine notches, from 51st to 42nd, in the overall rankings, which the organization said was an impressive feat.

IMD uses 329 criteria to determine its rankings, with two-thirds consisting of objective indicators such as statistics and other quantitative data, while the remaining one- third are devoted to perception indicators based on interviews.

Where Indonesia scored higher than its more illustrious Western counterparts was in a special “stress test” implemented as part of this year’s survey. This test looked at a country’s level of resilience toward an economic crisis and its ability to weather the storm. Indonesia ranked 33rd overall, and in the four factors measured in the stress test, the government came in at 26th while business was a respectable 36th.

The survey proves and articulates what has long been known. Since the 1997-98 Asian financial crisis, Indonesia has undergone painful reforms and restructuring at all levels of society. Free and transparent elections have created a vibrant democracy; corporate and banking reforms have created leaner and more prudent corporations and banks; while the fight against corruption has forced a change within the bureaucracy.

The country is now reaping the dividends of these forced changes. And as in 1997, the current global crisis is seen as an opportunity for further restructuring and reform in an effort to strengthen the institutions of state. Government policy making and responsiveness to a changing global economic climate have been the key to enhancing the country’s resilience.

Both the government and the business community must take heart from the results of the survey. It is the clearest indication yet that the country is on the right path, and more important, it must continue on this path if it is to be regarded as a true global player.

A lot of hard work still lies ahead. Indonesia is now ranked alongside other emerging markets such as Brazil, and ahead of the Philippines, Mexico, Russia and South Africa in the overall rankings. However, it is below China, India, Malaysia and Thailand, its closest neighbors and thus its main competitors.

As the IMD survey reveals, where Indonesia falls behind is in the quality of infrastructure. Better infrastructure will further improve the country’s economic resilience and, as such, enhance its competitiveness.

So while we can be proud of the country’s achievements to date, the IMD survey should serve as a signpost of where the country is today. It cannot afford to take its foot off the peddle just when it is starting to rev up its economic engine.