Photo: iStock
Dániel Kovács
02/11/2023 08:00
Having in reality - and not only on paper - broken away from its colonial master, the Netherlands, Indonesia immediately committed itself to economic development. This did not go smoothly, however, and in the 1960s the Southeast Asian state was taken over by a military regime which was only replaced in 1998. This left its mark on economic development, but since the change of regime the island nation has been on a sustained and uninterrupted growth path.
The privatisation of previously dominant public sector enterprises and the promotion of free market competition have contributed greatly to improving the business environment and accelerating economic growth. Infrastructure development has also been a key priority to foster economic growth. Indonesia has made significant efforts to expand the transport network, modernise ports, airports and roads. The information technology and technology sectors have also played an important role in the development of the Indonesian economy. Innovations in this area and the rise of the digital economy have contributed to the growth of small and medium-sized enterprises and employment. Progress in e-commerce and online services has opened the door to new business opportunities.
Indonesia is the world's fourth most populous country, with a population growing by 0.8-1 per cent per year, and by 2020 it exceeded 270 million people. Human resource development and education have also played a key role in strengthening the economy. The country has a large young population and various governments have made huge efforts to improve the quality of their education. This is partly due to the dynamic growth of economic performance, with GDP growth of 5% per year, well above the world average, in the more than twenty years since the change of regime.
While Indonesia used to be famous for its coal and palm oil exports, it now has a huge opportunity, with one fifth of the world's nickel reserves, the third largest cobalt producer and significant reserves of bauxite, which is all that is needed to make batteries for modern smart devices and electric cars.
The markedly neutral country welcomes metal processors from Korea, Japan, the US and China. In addition, the capital Jakarta is one of Southeast Asia's fastest growing tech and start-up havens and a magnet for venture capitalists.
As a result, Indonesia is now the world's 32nd largest exporter and 30th largest importer of goods. Between 2000 and 2019, the amount of working capital invested in the country more than ninefold increased to USD 232 billion. Combine this with the country's geopolitical importance, and it is likely that Indonesia will become one of the world's top ten economies before 2050.
The author is an economics journalist.