Editorial: Managing Indonesia’s Economic Growth

Indonesia today has the second-fastest growing economy among the Group of 20 nations, with only China on top. This is a massive achievement, and it should be acknowledged and celebrated.

But while Indonesia’s economy is primarily built on natural resources and consumption, China is a manufacturing powerhouse. China started its economic expansion by focusing on low-end manufacturing, but in the past three decades it has invested billions of dollars in high-tech manufacturing which is now bearing fruit.

Can Indonesia learn from China’s experience? This is what former President BJ Habibie is urging the government and the country’s private sector to focus on when he lamented the sad state of many strategic industries. He has a point and a sense of opportunity lost given his central role in founding many of these industries.

He cited the example of state-owned aircraft manufacturer Dirgantara Indonesia, which used to have 16,000 employees but now has 3,000.

The Strategic Industries Management Agency (BPIS), which coordinated 10 companies in 1998 and had a turnover of around $10 billion and 48,000 employees, was also disbanded. Industries such as aviation, shipping, machinery, electronics, communication, weaponry and other industries no longer receive government attention.

The existence of these industries was critical in providing highly skilled jobs. The former president’s message should be heeded by the government if it hopes to raise the economic competitiveness of the country in the next 20 to 30 years.

But we should not rush into developing such industries without careful thought and proper planning. More importantly, we need to build basic infrastructure first in a big way such as roads, highways, power plants, airports, sea ports and human resources. Only then should the country look at manufacturing planes and ships.