The
truth behind economic nationalism
Andre
Sinaga ; An Undergraduate Student at the Toronto
University, Canada
Sumber :
JAKARTA POST, 26 Juni 2012
The recent implementation of several
protectionist policies and an increase in government involvement in the economy
have led to mixed reactions throughout the country.
Several investors and economists worry that the policies will harm Indonesia’s growth, especially at a time of global economic uncertainty. Other citizens however laud the government, believing these steps will ensure that it is Indonesians, not foreign investors and firms, who benefit from Indonesia’s natural resources.
The changes in policy seem at first to be aimed at benefiting domestic producers. These policies include restrictions on imported foodstuffs, limits on foreign ownership, and renegotiation of mining contracts in favor of domestic firms.
Another event representative of the shift toward more protectionism is the controversy over an attempted takeover of an Indonesian bank, Danamon, by Singapore’s DBS Bank.
Almost immediately, Bank Indonesia (BI) reacted by revising bank ownership regulations, delaying the takeover bid for now.
The above acts and policies are examples of economic nationalism. Economic nationalism is actions undertaken in favor of greater domestic control over a nation’s economy.
Many citizens, perhaps under the impression that it is foreign actors who are benefiting from Indonesia’s economic growth, are happy with increased economic nationalism.
Unfortunately, however, economic nationalism does much more harm than good.
Several derogatory effects on the economy, such as the implementation of trade barriers by other nations, result but the most important is the threat posed to foreign direct investment (FDI).
With foreign investors already wary due to Indonesia’s underdeveloped infrastructure and political institutions, the new acts of economic nationalism will further discourage additional inflows of FDI.
Economic nationalism tends to be arbitrary and sudden, two factors abhorred by both domestic and foreign firms.
A reduction in FDI has wide reaching effects for several reasons in addition to job creation.
First, FDI is necessary in improving the infrastructure of Indonesia. Firms tend to develop the infrastructure surrounding their factories through the creation of roads, water services, electricity, etc. in order to lower costs of production and improve efficiency.
With a government plagued by bureaucratic barriers and corrupt officials, investments by foreign firms are the only sure way of improving the nation’s infrastructure.
Certainly, investments will be centered on the firm itself, but the resulting improvement in infrastructure will also improve the lives of nearby communities.
Second, FDI brings new technologies into Indonesia. This motivates students to learn the skills necessary in order to operate the new technology, resulting in a group of globally competitive technocrats.
These technocrats will allow domestic firms to be globally competitive through their expertise but will also spur on innovation within Indonesia.
Innovation is critical in a highly competitive world and with the world shifting toward more sustainable and less fossil-fuel based technologies.
Indonesia must take the initiative through innovation in order to benefit from these changes. This in turn will lead to a reduction in unemployment as new industries are created in order to produce the new, innovative products.
Hence, one can observe that FDI is extremely beneficial. Economic nationalism only serves to hamper inflows of FDI and the government must therefore seriously reconsider their policies.
Ultimately however, the need for FDI is a direct result of the sheer ineffectiveness of the government in the field of infrastructure and innovation.
Despite being a member of the exclusive G20, Indonesia’s infrastructure is extremely undeveloped. The 2011 Doing Business Index placed Indonesia an embarrassing 161 out of 183 nations in getting electricity and 126 in getting credit.
Overall, the nation was placed 129 in “ease of doing business”, beaten by countries such as Honduras and Tanzania. With new players from Africa and Eastern Europe offering low labor costs, the current economic situation is highly competitive and Indonesia cannot afford to be limited by a lack of infrastructure in order to continue on its path of economic growth.
Innovation in Indonesia is also seriously lacking. The 2011 Global Innovation Index ranked Indonesia 99th out of 125 nations.
Unlike other state-led research departments such as Taiwan’s Industrial Technology Research Institute (ITRI), Indonesia’s various governmental research bodies have failed to create a high-tech economy, with labor-intensive manufacturing still the order of the day.
The technology necessary for high-tech manufacturing is still largely lacking in Indonesia, as illustrated by the fact that the majority of exports are commodities.
The point is that the government simply does not have the credibility to launch policies of economic nationalism. The incapacity and inefficiencies that plague public institutions beggar the imagination and have played a direct role in stifling improvements in infrastructure and encouraging innovation.
With a lack of regard for the rule of law, rampant corruption, unnecessarily complex bureaucracy and several other issues affecting public institutions, the Indonesian government to date cannot be depended upon to improve the nation’s infrastructure and encourage innovation.
Hence, whether one likes it or not, FDI is absolutely necessary for Indonesia’s economy and the long-term benefits are tremendous as highlighted above.
Policies of economic nationalism must therefore be halted immediately in order to further encourage inflows of FDI. Were the government effective in improving infrastructure and encouraging innovation, economic nationalism would not be such a major issue.
Unfortunately however, the government is galaxies away from being effective and therefore, the government should drop its current policies of economic nationalism in order to attract the foreign investment so necessary for the future of this country. ●
Several investors and economists worry that the policies will harm Indonesia’s growth, especially at a time of global economic uncertainty. Other citizens however laud the government, believing these steps will ensure that it is Indonesians, not foreign investors and firms, who benefit from Indonesia’s natural resources.
The changes in policy seem at first to be aimed at benefiting domestic producers. These policies include restrictions on imported foodstuffs, limits on foreign ownership, and renegotiation of mining contracts in favor of domestic firms.
Another event representative of the shift toward more protectionism is the controversy over an attempted takeover of an Indonesian bank, Danamon, by Singapore’s DBS Bank.
Almost immediately, Bank Indonesia (BI) reacted by revising bank ownership regulations, delaying the takeover bid for now.
The above acts and policies are examples of economic nationalism. Economic nationalism is actions undertaken in favor of greater domestic control over a nation’s economy.
Many citizens, perhaps under the impression that it is foreign actors who are benefiting from Indonesia’s economic growth, are happy with increased economic nationalism.
Unfortunately, however, economic nationalism does much more harm than good.
Several derogatory effects on the economy, such as the implementation of trade barriers by other nations, result but the most important is the threat posed to foreign direct investment (FDI).
With foreign investors already wary due to Indonesia’s underdeveloped infrastructure and political institutions, the new acts of economic nationalism will further discourage additional inflows of FDI.
Economic nationalism tends to be arbitrary and sudden, two factors abhorred by both domestic and foreign firms.
A reduction in FDI has wide reaching effects for several reasons in addition to job creation.
First, FDI is necessary in improving the infrastructure of Indonesia. Firms tend to develop the infrastructure surrounding their factories through the creation of roads, water services, electricity, etc. in order to lower costs of production and improve efficiency.
With a government plagued by bureaucratic barriers and corrupt officials, investments by foreign firms are the only sure way of improving the nation’s infrastructure.
Certainly, investments will be centered on the firm itself, but the resulting improvement in infrastructure will also improve the lives of nearby communities.
Second, FDI brings new technologies into Indonesia. This motivates students to learn the skills necessary in order to operate the new technology, resulting in a group of globally competitive technocrats.
These technocrats will allow domestic firms to be globally competitive through their expertise but will also spur on innovation within Indonesia.
Innovation is critical in a highly competitive world and with the world shifting toward more sustainable and less fossil-fuel based technologies.
Indonesia must take the initiative through innovation in order to benefit from these changes. This in turn will lead to a reduction in unemployment as new industries are created in order to produce the new, innovative products.
Hence, one can observe that FDI is extremely beneficial. Economic nationalism only serves to hamper inflows of FDI and the government must therefore seriously reconsider their policies.
Ultimately however, the need for FDI is a direct result of the sheer ineffectiveness of the government in the field of infrastructure and innovation.
Despite being a member of the exclusive G20, Indonesia’s infrastructure is extremely undeveloped. The 2011 Doing Business Index placed Indonesia an embarrassing 161 out of 183 nations in getting electricity and 126 in getting credit.
Overall, the nation was placed 129 in “ease of doing business”, beaten by countries such as Honduras and Tanzania. With new players from Africa and Eastern Europe offering low labor costs, the current economic situation is highly competitive and Indonesia cannot afford to be limited by a lack of infrastructure in order to continue on its path of economic growth.
Innovation in Indonesia is also seriously lacking. The 2011 Global Innovation Index ranked Indonesia 99th out of 125 nations.
Unlike other state-led research departments such as Taiwan’s Industrial Technology Research Institute (ITRI), Indonesia’s various governmental research bodies have failed to create a high-tech economy, with labor-intensive manufacturing still the order of the day.
The technology necessary for high-tech manufacturing is still largely lacking in Indonesia, as illustrated by the fact that the majority of exports are commodities.
The point is that the government simply does not have the credibility to launch policies of economic nationalism. The incapacity and inefficiencies that plague public institutions beggar the imagination and have played a direct role in stifling improvements in infrastructure and encouraging innovation.
With a lack of regard for the rule of law, rampant corruption, unnecessarily complex bureaucracy and several other issues affecting public institutions, the Indonesian government to date cannot be depended upon to improve the nation’s infrastructure and encourage innovation.
Hence, whether one likes it or not, FDI is absolutely necessary for Indonesia’s economy and the long-term benefits are tremendous as highlighted above.
Policies of economic nationalism must therefore be halted immediately in order to further encourage inflows of FDI. Were the government effective in improving infrastructure and encouraging innovation, economic nationalism would not be such a major issue.
Unfortunately however, the government is galaxies away from being effective and therefore, the government should drop its current policies of economic nationalism in order to attract the foreign investment so necessary for the future of this country. ●
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