In the eyes of foreign investors, one of the prime considerations in investing their capital was long term security. This was related to socio-political stability and law and order. Generally the potential of peace disturbances emerged in developing countries in times of transition of power.
From experience lessons was learned that usually political unrest busted out country toward or during certain events like election of head of Government until the afterglow. Developing countries in Southeast Asia had such experience many times before. Generally political tension cooled down as reconciliation was agreed between opposing group without violence but through diplomatic ways.
Today Indonesia was in the process of transition of power from the present Government to the next Government. The past legislative election had run peacefully and so would the Presidential election which was expected to happen safely and orderly.
In the eyes of foreign investors the winner of Presidential election determined the shape of Indonesia’s economy. Before voting day, index of stock market and Rupiah increased by around 2.5%. So far, index IHSG increased by 17% while Rupiah was Appreciated by 4.7%.whoever the winner, the expectation was that the next President would end the unending uncertainty made by the previous Government, promote investment and jack up economic growth.
International investors were important constituent for the next President. Indonesia did not only rely on foreign investment [PMA] in development but also needed foreign portofolio to cover up deficit in current transaction. Moreover around 46% of Government’s debt was in USD, Yen, or Euro. So far foreign investors commanded over 36% of Rupiah bonds.
In fact not all of overseas capital originated from foreign citizens. Many capital of Indonesia origin were parked in Singapore banks or other countries although the amount was not precisely known. If investment climate at home could be well secured, it would fish out part of the fund to flow back to Indonesia.
So the mission of the next Government was not only to convince foreign investors but also to assure domestic investors [PMDN]. Beside Government consumption and expenditure, direct investment or formation of gross fixed capital was expected to contribute more to national GDP.
Today household consumption contributed 56% to GDP, government expenditure around 9% while net contribution from import-export was still minus, contribution from current transaction could soar up to 35% against the previous average of 33%.
To drum up foreign capital to flow back Indonesia was not an easy task. While socio-political stability and law and order was guaranteed, foreign investors were also expecting reformation of the bureaucracy within the context of ease in doing business.
Survey outcome unveiled that Indonesia’s ranking sank deep to 120 below Jordanian and El Salvador. Indonesia was in the position of 144 in terms of bankruptcy procedure, 147 in honoring contract, and 175 in ease in company establishment. Many circles including investors were not too optimistic.
Furthermore Standard & Poor’s had reminded Indonesia that political stagnation in Parliament had the potential to hold back the new Government from attaining many things whoever the leader might be. If there was no reformation of the bureaucracy investment, public or private, would not contribute much to development. Economic growth would be driven by consumption, the contribution of which was declining.
Indonesia’s competitive edge rank rose steeply, up to level 38 against level 50 last year. “After posting down turn over the past 3 years, Indonesia again jumped up to be one of the highest growth attaining nation this year.” The world’s Economic Forum [WEF] reported when releasing the Global Competitiveness Report 2013 – 2014. Indonesia should be in better position this year; the reason was in spite of the achievement, Indonesia was still way behind other Asean countries.
Polemics was still going on over the fact that Indonesia had succeeded in moving up by 12 levels, an achievement which was worthy of appreciation but compared to other neighboring countries Indonesia was still left behind. Singapore was in 2nd position.
It was undeniable that there were still shortcomings in promotion competitiveness at Asean regional and global level. Ironically Indonesia still had enormous potentials compared to other Asean countries. As the world’s biggest archipelago with 1.904.569 km2 of land including abundant natural resources, Indonesia had not maximized her potentials to progress. Many unrespectable persons drained the nation’s wealth for their own greed.
Betterment of competitiveness could be attained by maintaining national stability through political and economical stability, National stability was in the hands of the new ruler. Reformation of complicated bureaucracy would ease procedure or investors to come and invest.
Entry of investors would support economic growth. Economic policy which was pro-business would support businessplayers. The role of businessplayers were great in the effort to strengthen competitiveness and maintain economic stability by being obedient taxpayers, opening employment opportunities and distributing development.
Businessplayers were the nation’s human resource asset in strengthen competitiveness. Indonesia’s abundant natural resources must be complemented with competent and responsible human resources. The nation’s human resources must be well prepared and be armed with knowledge and high skill.
Moreover January 1 2015 is the effective date of Asean Economic Community [AEC] which demanded human resources of high competence and high competitiveness, and this should be in tandem with development of high technology to meet global standard.
Technological advancement must be accompanied by building of sound infra structure. Although WEF had promoted Indonesia’s ranking from level 96 of 14 countries in 2009 to number 82 of 148 countries in 2013, development of basic infra-structure must still be spurred on to be competitive regionally or globally.
Regional and global competition must not be seen as a threat to Indonesia but as a challenge instead to penetrate a broader market. Indonesia must be able to uplift her competitive edge to be better level with leadership of high integrity, favorable business environment, competent human resources, advanced technology and sound basic infra structure. (SS)
Business New - July 18, 2014