Economics Problem in Indonesia

          As we know, Indonesia is a very rich country, especially in natural resources. But unfortunately, Indonesia cannot use the natural resources maximally. That happens because Indonesia does’nt have good quality human resources even though Indonesia is a country with the high population in the world. That’s one of many economic problems in Indonesia. Economics problems are also occurs because of the needs and wants of people are endless, but the resources available to satisfy theirs are limited. In Indonesia, the government is still looking for the solution to overcome the economics problem. This essay will focus on the economics problems in this country.  In my opinion, there are 3 big economics problems that can hardly be overcome.

          The first problem is low economic growth. Economic growth is the development of activities in the economy that increase the production of goods and services. Most developing countries like Indonesia face many problems in accelerating their economic growth. Economic growth in Indonesia is still low because the number of population in Indonesia is very high. Logically, the high population can increase the economic growth, but in Indonesia, the high population is not balanced with the number of jobs. Beside that, Indonesia cannot manage the natural resources because of the lack of quality of human resources. So Indonesia cannot use the natural resources properly. But, economic growth can be increased by developing the infrastructure, increasing saving and investment, improving the public education and formulate and implement economic planning.

          The second problem is external debt or foreign debt. Foreign debt is a country’s total debt obtained from the creditor outside the country. In other words, foreign debt is the source of state financing coming from other countries, agencies or international financial institutions in the form of foreign exchange, goods, services including the payment in the future based on an agreement. Recipients of foreign debt may include governments, companies, and individuals. In the long term, foreign debt can cause many economics problems like inflation. But in the short term, foreign debt can help Indonesian government in an effort to close the budget deficit. Foreign debt can also assist the development in Indonesia, by using the additional funds from the other country. Foreign debt becomes a serious problem in Indonesia. The last data reported by BI shows the position of Indonesian foreign debt at the end of December, 2016 are USD 316,97 billion or Rp. 4.225 trillion (http://www.bi.go.id/en/statistik/utang-luar-negeri/Default.aspx) . But actually, Indonesia can decrease the external debt by suppress all forms of wastage of state, regulate export and import that can make the domestic economy stronger, and increase the taxes on luxury goods and imported goods.

           The third problem is inflation. Inflation is a condition that general level of prices and wages are increase continuously (Malinvaud, 2000). In another word, inflation is also a process of decline in currency values continuously and very easy to rides. Based on Indonesian central bank’s data,  the highest inflation level in 2016 occurred in March amounting 4.45% (http://www.bi.go.id/id/moneter/inflasi/data/Default.aspx) . Actually, the inflation occurred because of rising public demand for goods and services, the increase of production levels, deficit budget, and the decline of currency exchange rate. To reduce the inflation level in Indonesia, the government must have a policy that has a good strategy to reduce or overcome the inflation. The policy could be like monetary or fiscal development policy. The other ways are the government must raise interest rates in the bank and make policies to the prices on the market. Those ways must be created to make Indonesian people diligently to save their money to the bank that also can press the circulation of the money. Inflation can also reduce by maintaining the stability of the currency exchange rates. It must be implemented because rupiah rates can easily slide against foreign currencies that will encourage inflation. With that ways, government can reduce or even overcome the problem of inflation in Indonesia.

          Indonesia has many economics problems in the short term or even in the long term. A few of them is a big problem that’s very difficult to overcome. Actually, the government is trying to overcome the problem by implementing the economic system of Pancasila. But this system run unmaximally. Because of that, the government must improve that economic system to resolve or even to overcome the economic problems to make Indonesian economy better.

    

REFERENCES:

Malinvaud, Edmond. (2000). Inflation, employment, and business fluctuations.Amsterdam: Elsevier Science B.V

Bank Sentral Republik Indonesia. (2016). Position of Indonesian Foreign debt on December, 2016. Retrieved from http://www.bi.go.id/en/statistik/utang-luar-negeri/Default.aspx

Bank Sentral Republik Indonesia. (2016). the highest inflation level in 2016 occurred on March amounting 4.45%. Retrieved from http://www.bi.go.id/id/moneter/inflasi/data/Default.aspx