5 2 DIAS SATRIA young economist FEB UB

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Addressing competitiveness and

productivity in Indonesia

Hotel Grand Hyatt, Nusa Dua - Bali 10-11 December 2015

Presented by:

Dias Satria

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Outline

1. Highlights of Indonesian economy

2. Competitiveness and productivity

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Indonesia

¡ 

Population:

254 Million

¡ 

GDP:

$ 888 Billion

¡ 

Lower Middle Income

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Economic growth

2015

Austalia EU Brazil Russia China Indonesia Malaysia India Singapore

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Global monetary

architecture

¡ 

US Dollar standard and Global imbalance

¡  US Economy dominates for about 25-30% of the world economy

¡  US $ dominates 70% of currency reserve

¡  Shrinking US$ liquidity triggers financial crisis

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Capital account

balance

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Perkembangan

PMA dan PMDN

*Konversi kurs berdasarkan asumsi BKPM *2015 sampai dengan Q1

PMA* PMDN Target on Going Total

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Other economic indicators (1)

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Inflation - September 2015 > 6.83% (yoy)

¡  Administered price (11.26%) and Volatile foods (8.52%)

¡ 

Gini-ratio

¡  2010 (0.38) – 2013 (0.41) – 2014 (0.42) ¡  inclusive growth

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External risk score (Fragile 5)

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Other economic indicators (2)

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ICOR (Incremental Capital to Output Ratio)

¡  2001-2014 (4.2%)

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Indonesian competitiveness index (WEF)

¡  Efficiency driven ¡  Indonesia (Rank 34)

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Long-term competitiveness

¡  TFP (Total Factor Productivity)

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Trade performance

¡  Trade deficit 2012 – 2014, 2015 Trade surplus US$ 7.13bn ¡  Slow down in external demand (Including Chinese

economy)

¡  The depreciation of Rupiah has small impact to export performance

¡  Import is slowing down faster than export (capital goods and intermediate goods)

¡ 

Shift from manufacture to commodity (natural

resources)

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Manufacturing industry

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Is manufacturing industry being driver of job

creation and productivity growth?

¡  TFP (Total Factor Productivity)

¡  Manufacturing value-added per employee

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Innovation

(Technological and Knowledge

development)

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Opportunities in services

industry (ASEAN)

Goods Services

Agro-based products Air travel

Automotive E-ASEAN

Electronics Healthcare

Fisheries Tourism

Rubber-based products Logistics services

Textiles & apparels

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Issues (1) macroeconomic

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Global economic pressures (External)

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Inflation

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Currency and financial risks

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Maintaining macro and

financial stability

¡  Fiscal space (revenue target?) – Effective spending ¡  Monetary policy – interest rates? VS Reserve

requirements? – financial inclusive

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Issues (2) trade and industry

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Local economic fragmentation

¡  High costs economy

¡  Not flexible Labor market(decline productivity)

¡  Logistics and transaction costs

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Marginalization in Global Value Chain

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Issues = competitiveness and productivity

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Issues (3) Policies

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Political issues

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Policies

1. Structural reforms

2. Sound Investment climate

3. Human capital improvement

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Policies

5. Efficient services (support competitiveness)

6. Flexible labor market

7. Intellectual property rights

8. Policies to support Inclusive growth.

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Industrial policies

Involve in a Global Value chain

Increasing the value added

Deepening industrial sector

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Trade policies

Keeping our

markets open

Involve in GVC

(Manufacture and

services)

Diversification

export and product

structure

(innovation and

creative)

Clear strategy of

use NTB (Non tariff

barrier)

Domestic policies

(trade facilitation,

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