Jokowi Dilemma in Economics Development

Indonesia is the largest country in Southeast Asia in term of population, territory area and also in economic scale. The Indonesian economy is the world’s 16th largest by nominal GDP and the 8th largest by GDP at PPP. Indonesia with four other countries in Asia including China, India, Japan and South Korea is also part of Group of Twenty or popular we know as G20. The group consists of 20 country that has the largest GDP in the world. Its forum member is from Government executive and Central Bank Governor held as high-level meeting that taking on critical economics and political issues. Indonesia membership as the G20 country gives it the power to influencing the important economics decision and making a better role in development for the world.

As 3,5% population of the world or about 261 million people, Indonesia is a big market for so many product and service. The people of Indonesia also has high consume to everything provided in the market that we call it as consumerism. With that potential, It becomes clear that foreign company is  fighting for Indonesia markets. This condition leads to massive investment in Indonesia in almost all industries.

The government also support for this condition. Indonesia via its tenth economics package fully open 100% foreign investment in 35 business field include healthy, pharmacy, tourism and film industry. Darmin Nasution Coordinating Minister for Economic Affairs stated “in a situation of a slowing world economy, world trade fell, interest for the investments it down, for that Indonesia take special measures so that the investment is not down, that simple logic” after the press conference at the Presidential Office on 12/02/16

The government has big interest to the investor for investing their money in Indonesia industries as it will emerge the economic activities and give added value for product and service to the society and it will increase economics growth and people welfare of Indonesia. But the investment in massive scale and almost in all industries is bringing side effect. The opposite that maybe the government never think about or easy ignored.

Indonesia economics growth during the 1970s and 1980s importantly supported by foreign investment. In that period the government opens all natural resources to investor mainly from America. But along 1997/1998 economics crisis bring it long term effect on Indonesia. Until now we are not fully free from the effect of economics crisis in 1997/1998.

Todays, Indonesia is less power to control their strategic industries such as oil, gas and mineral resources, communication, financial industry and many others industries. Almost all of industries in Indonesia is dominantly held by MNC e.g in oil and gas we could see Chevron Pacific, Petrochina, ConocoPhillips, BP, Exxon and nine other MNC that control over 80% of the industry capacity. We know that oil, gas, and mineral is very important industries that support and driving all industries, it becomes a crucial part of the one country economic cycles. If the government doesn’t pay attention to things like this, we don’t know what we can hope for our nation future.

Trade and investment in many cases are helping people to achieve prosperity. But if we do not pay carefully we will lose our national resources without getting a benefit to country people.

Say if it happens continuously. Maybe in next 10-year Indonesia will not have any control over national resources that affect all country people. Water as a physical basic need for people now is controlled and owned by a foreign company. Many large springs in West Java, Central Java, and East Java is fully controlled by a private company.

Here is a substantial conflict of interest. When a country tries to satisfy the basic need for people vs company interest for making a profit.

Indonesia now is having a lot of international economics agreement with developing and developed countries such as china, India, and America. Is it good for our national interest? Is Indonesia ready to compete with the free trade agreement?

The global country trend is they are trying to protect their strategic industry instead of making free trade zone. China is very protective and making a lot of FTA in country or region where it will make a net surplus. British Exit from Europe is also triggered by their experiences that become Europe member causes the country hard to make a decision for their national interest.

Jokowi administrative should more carefully considering the national interest in making free trade agreement. He should make a decision for short term in making economic growth but more important one is long term interest on national control over strategies industries to people priorities.

Gregory Mankiw Professor of Economics at Harvard University tell us about the first principle of economics #1 People face trade off. Every economics entity (i.e household, company and government) face trade off that must to make a choice in the term of doing somethings. If one is chosen we will lose the other choice.

And now Jokowi is facing this great dilemma.