TheJakartaPost
Please Update your browser
Your browser is out of date, and may not be compatible with our website. A list of the most popular web browsers can be found below.
Just click on the icons to get to the download page.
Popular Reads
Top Results
No results found. Please check your search term and try again
Can't find what you're looking for?
View all search results
Popular Reads
Top Results
No results found. Please check your search term and try again
Can't find what you're looking for?
View all search resultsIs Indonesia among the fastest-growing economies?
According to the theory, for Indonesia to prosper, we should specialize in what we are currently good at producing, such as palm oil and coal.
Change text size
Gift Premium Articles
to Anyone
Share the best of The Jakarta Post with friends, family, or colleagues. As a subscriber, you can gift 3 to 5 articles each month that anyone can read—no subscription needed!
Lifting up: Workers use a crane to move a container at Tanjung Priok container terminal in North Jakarta on Aug. 5. Statistics Indonesia recorded a 19.74 percent year-on-year increase in Indonesian exports in the second quarter of the year. (Antara/Rivan Awal Lingga)
T
hese days, it is not hard to be bullish about Indonesia. As the world teeters on the brink of recession with soaring inflation, Indonesia’s economy seems to be comparatively resilient. Indonesia recorded 5.44 percent GDP growth in the second quarter of this year. Our trade surplus in the first half of the year was more than double the same period last year.
Scratch a bit deeper though, and our vanity may quickly dissipate. Our economy is doing well partly because the price of commodities including palm oil and coal is exceptionally high. Once the commodities price falls our resources-dependent economy will inevitably take a hit.
Fear not, there is another reason why we should not shrug Indonesia off. Harvard University’s Growth Lab last week released its latest projection for the economic growth of countries around the world in the coming years until 2030. Indonesia ranks very high on the list.
In fact, Indonesia is projected to be the fifth-highest-growing economy in the world with annual growth at 5.64 percent. Since Harvard Growth Lab is renowned for its stellar research on economic development, we may be tempted to take the projection at face value.
That is the last thing we should do. The projection is not set in stone. It entails many “ifs” and various contingencies. We need to ensure that the prerequisite conditionalities are met for such projection to materialize.
First, we should understand the logic behind the projection. Doing so requires deconstructing a long-standing belief that is often taught as an absolute truth to Econ 101 students: the comparative-advantage theory. According to the theory, for Indonesia to prosper, we should specialize in what we are currently good at producing, such as palm oil and coal.
It does not take an economist to note that there is an intrinsic problem with this theory in the long run. The theory is inherently static; if you produce X today, then for the sake of efficiency, you should stick to X forever.
