[Kajian Post] Asian Century, What Should We Do to Face This Challenge?

Jaysa Rafi Prana | Trainee Divisi Kajian Kanopi FEUI 2012 | Ilmu Ekonomi 2012

Euro zone and United States endless crisis has brought world into a deep worry about how’s the world will become in five, ten, or twenty years ahead. As we all know, since the recession that has been happening in US and Europe since 2008 until now, Asia has become the most suitable option for the world to be relying on. Amid the crisis that is occurring in the world right now with the Euro Zone crisis with record of 0.5% economy shrinking on the 2nd quarter of 2012 (Bloomberg), Emerging East Asia (EEA) —including Indonesia, Malaysia, Thailand, and Vietnam—economy still marked a very nice projection of growth at the rate of 7.6% for the 2012 (World Bank). This fact is the reason why Asia is projected by many of the economists to be the biggest player of world’s economy in 2050 accounted for 52% the world’s economy (ADB). According to World Bank data, the durability of EEA’s strong economic outlook is due to these factors such as:

· Durable Macroeconomic that is caused by strong economic growth with improved consumer confidence and decreasing ratio of total debt to GDP

· Less dependency on the external sector, more supported by domestic consumption

· Rising middle income class and abundant labor force

According to the data from ADB, Asian century driven by Asia 7: India, Indonesia, Japan, Malaysia, China, South Korea, and Thailand which are projected to account for 91% of Asia’s growth between 2010—2050. Therefore, the improvement needed in order to achieve Asian century can be classified into two big classification, those are external factors and internal factors. External factors included integration of region’s economy, trade liberalization, and political tranquility between one country to another. Internal factors, which I will be focusing on, consists of education, innovation and technology, infrastructure, and policy regulation and institution.

Education is definitely one of the key factors of one’s country economic development. As we all know, skilled workers are paid better than the unskilled one. Therefore, in order to improve the quality of living, a country should put a greater emphasize on its people education in order them to have skills that they can rely on in the job industry. To improve the education, university number needs to be increase because universities are probably the most important producer of the kind of knowledge that leads to transformative product innovation; and the nature of education should foster creativity, tolerates risks and failures, and educating the students to think out of the box.

Innovation and technology development are also important for a country to improve their economic condition. Like the comparative advantage theory -- a country should sell to other countries those products that it produces most efficiently, and buy from other countries those products it cannot produce as effectively of efficiently—therefore by emphasizing on research and development, a country can produce product more efficiently and effectively by finding the best and the most suitable method of producing product. In the end this improvement may lead to more revenue since a country can produce greater amount of product more effectively and efficiently than the others do. Indonesia really need this improvement as soon as possible, according to the data from ADB, Indonesia just spend 0.06% of its GDP for its R&D (the lowest) compare with Korea which spend 3% of its GDP for R&D program.

Infrastructure is one of the most vital factors in producing and delivering products to the consumer. Infrastructures include roads, electricity, water supply, telecommunications, etc. Like we all know Indonesia and other developing countries don’t have infrastructure as good as Japan or other developed nation. An example of a case of Indonesia’s lack of infrastructure is when producer can only delivery product late at night in order to avoid the traffic during the working hours, and how long it takes for the goods to be shipped to the consumer. We can imagine how much it costs the businessman for the lateness of shipping since they have to pay more for the driver wage and how inefficient the production and delivery process. Therefore we need to improve our infrastructure condition by allocating more funds to this sector and preventing the funds from going into irresponsible people’s accounts.

The last thing needs to be improved is the policy regulations and institution. Policy regulations and institution in Indonesia is still relatively week. We can see it from the labor force regulation; there are still some flaws in the labor force regulation in Indonesia that leads to debate and excessive demonstration across the country. This things need to be fixed as soon as possible along with the institutional reform such as the excessive paperwork that needs to be done before opening a business and unnecessary cost to pay a permit for opening a business. In doing reform for the policy regulations and institution, we have to follow china’s revolutionary step (the one day having the permit for business) in order to compete in global market and in the end improving our country’s economy and competitiveness in global market.

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