Without government involvement, Indonesia is experiencing good times with one of the highest economic growth rates in the world. Needless to say, things could have been even better if the government provided assistance to help the economy and take Southeast Asia’s largest economy to a whole new level. It has been estimated that if Indonesia made certain changes to its economy, each citizen would be more than forty percent wealthier by 2030. Also by this time, if it has the right reforms and remains on this path, it would be the world’s sixth largest economy. The main areas of renovation would be the outdated infrastructure along with the increase in bureaucrats.

The power that Indonesia has given to local officials has risen sharply in the last decade, and there are now around 4.6 million civil servants and 73% of them work at the local level. The country must indulge in the powers of these smaller components if it wants to achieve better growth and investment. Indonesia must analyze the effectiveness of these bureaucracies, not only the size. This will allow the country to have the most efficient group possible, while eliminating the bureaucracies that are slowing the economy down. The lack of initiative in President Susilo Bambang Yudhoyono’s second term of presidency has held back any reform from taking place.

Transportation and communications had the biggest growth among the sectors in the first half of 2012, and the trade, hotel, and restaurant sector also grew fast as the population is traveling and becoming wealthier while the economy increases. Even with the slowing global demand for commodities, especially Chinese commodities, Indonesia was able to stabilize its growth rate. The low reliance on exports cushioned the impact of this demand cut. With the private and government investment that helped Indonesia begin the rally, there is a lot that they can now expand on and continue to experience this incredible growth.

Southeast Asia as a whole has had a dramatic increase in investors as economies have posted higher activity, and they are betting on long term growth for these economies. Thailand and Malaysia also have been noted as countries where the economy is growing at an increased rate, even with the letdown of demand from China and European Countries. These increases will not be sustained without reform, however, and if the reform is put off for a long time, the economies will become outdated and begin to under-perform. What are the first steps for Indonesia to take in updating or reforming its economy?

Share this article