Taking Advantage of Opportunities

Kompas

Prasetyantoko

History never follows a straight line. Globalization supported by high technology has improved convergence, but political dynamics are increasingly diverging. The election of Boris Johnson as the British Prime Minister has strengthened the wave of anti-globalization.

The advancement of technology has actually caused a paradox in the high-level dispute between the United States and China, which has led to declines in trade, investment and global economic growth. The International Monetary Fund (IMF) has again lowered its global growth projection to 3.2 percent in 2019 and 3.5 percent in 2020.

The global slowdown is caused mostly by the economic slowdown in developed countries, while developing countries still have room to spur their potential growth. For us, it\'s time to get serious. The vision of reelected President Joko “Jokowi” Widodo focuses more on economic issues, particularly in continuing the development of infrastructure and human resource to increase investment, as well as bureaucratic reform and state budget spending.

While his speech may seem rather omissive because it does not touch on environmental matters, law enforcement and other social issues, it does not mean that this nation is misguided. The next five years must focus on economic issues because the opportunities are large, while time is limited.

The foremost issue in the short term is to increase Indonesia’s resilience against global turmoil. We still have large weaknesses, such as our dependence on imports. We have suffered a current account deficit since the fourth quarter of 2011.

KOMPAS/MUKHAMAD KURNIAWAN

Control room operators monitor operations on Monday (28/1/2019) at a ferronickel processing plant at Morowali Industrial Estate in Bahodopi, Morowali regency, Central Sulawesi. PT Indonesia Morowali Industrial Park (IMIP) said it employs 30,219 foreign workers, about 10 percent of its Indonesian workforce.

The current account deficit was US$31 billion in 2018, or 2.98 percent of gross domestic product (GDP), while the deficit reached $6.9 billion in the first quarter of 2019, or 2.6 percent of GDP.

The current account deficit has occurred from a deficit in trade, services and oil and gas. The three sectors need fundamental transformation. The problem is competitiveness. Normatively, the US-China trade war can create opportunities, but the competitiveness of our exports has actually continued to decrease.

According to Statistics Indonesia (BPS), exports fell 20.54 percent to $11.78 billion in June 2019 from $14.83 billion in May 2019. Processing industry exports fell 19.62 percent, although they contributed 76.57 percent to total exports.

Exports to the US declined the most by $560 million, while exports to China fell by $450 million and to India by $327 million. China is the country’s largest export destination, accounting for 15 percent of all exports, followed by the US with 11 percent, and India is the fourth largest export destination with 7.6 percent.

In terms of imports, raw materials contributed the most at 76.16 percent, followed by capital goods a 14.93 percent and consumer goods at 8.91 percent.

KOMPAS/WAWAN H PRABOWO

Female workers produce shoes on 4 April 2019 at a factory in Cikupa, Tangerang, Banten.

The balance of trade needs to be improved by increasing the competitiveness of our export products while developing local industries to produce raw materials. Developing large-scale businesses that produce raw materials must be prioritized by inviting foreign investors.

Citing data from the United Nations Conference on Trade and Development (UNCTAD), the National Development Planning Agency (Bappenas) stated that Indonesia\'s direct investment contributed only 22.1 percent of GDP. Direct investment contributes 25.1 percent of GDP in the Philippines, 43 percent in Malaysia, 45 percent in Thailand, and 60 percent in Vietnam.

Inviting large foreign investment should be an important part of the agenda for accelerating the domestic economy, but it does not mean neglecting domestic investment. Many industry sectors have succeeded in developing raw materials for export-oriented products, such as the pharmaceutical sector. However, because the scale of the businesses is still relatively small, their role is often forgotten.

KOMPAS/PRIYOMBODO

An One-Stop Integrated Services (PTSP) officer explains the Online Single Submission (OSS) system to a customer on Friday (26/7/2019) at the Investment Coordinating Board (BKPM) in Jakarta. The government has established the electronic integrated business licensing service to facilitate speedy processing of business licenses through central-regional synchronization in an effort to increase local investment.

The competitiveness of domestic industry must be the main focus. A variety of regulatory and institutional issues have undermined the competitiveness of our economy. In employment, Bappenas cited the data of the 2018 Global Innovation Index that the cost of dismissing a worker in Indonesia was twice that in Turkey or quadruple that in Brazil, and six times that in South Africa.

While we are stricter than many other countries in employing skilled foreign workers, the statistics show only one foreign worker is employed for every 763 local workers. In Malaysia, the ratio is 1:11, and 1:19 in Thailand, 1:154 in Nigeria and 1: 258 in Brazil.

In terms of increasing the capacity of our workers, Indonesia tends to provide the least support compared to other countries. Less than 10 percent of Indonesian companies provide formal training, compared to 20 percent in Vietnam, 60 percent in the Philippines and 80 percent in China.

The revision to Employment Law No. 13/2003 should focus on reducing corporate burdens on the one hand and increasing skilled workers on the other. Government Regulation No. 45/2019 on Taxable Incomes and Income Tax can be directed to accelerate capacity building.

KOMPAS/DWI BAYU RADIUS

Workers affix decals to ceramic bowls on 13 May 2019 at the Indo Porcelain tableware factory in Tangerang, Banten. The company produces about 1.7 million pieces of dishware per month, of which 65 percent is exported to the United States, Europe and other parts of Asia.

Despite many breakthroughs in the customs sector, processing export documents still takes a long time at around 4.5 days, while it takes only 0.5 days in Singapore, 1.6 days in Malaysia, and 2.3 days in Thailand.

Institutional transformation is still ongoing through various attempts to simplify regulations. A focus on increasing competitiveness is urgently needed for the future so that we are not crushed by the global (political) economic cycle.

The opportunities are large, but require much effort to use. With such problems, it is no exaggeration to say that the economic team of the next cabinet should be filled with independent professionals, not political party professionals.

KOMPAS/HERU SRI KUMORO

Reelected President Joko “Jokowi” Widodo speaks on Sunday (14/7/2019) at the “Vision for Indonesia” rally in Sentul, Bogor, West Java. Thousands of volunteers and political party leaders that backed the Jokowi-Amin presidential campaign attended the event, where the President outlined his vision for his second and final term in office.

As the results of the Katadata Insight Center (KIC) survey indicate, 65 percent of respondents from investment institutions expect the economic team of Jokowi’s next cabinet to come from purely professional circles.

A PRASETYANTOKO, Lecturer, Atma Jaya Catholic University Jakarta