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Sunday, May 29, 2011

Globalization and Indonesia 2030

The 21st century is Asia's century. By 2050 over half the world's gross national product would be controlled by Asia. China, displacing the United States, will become the world's strongest players, followed by India in the third position. Then, what role and in which the position of Indonesia at that time?

China and India with all its expansion, according to the current number of parameters and prediction of the future, it is clear is the winner in the battle field is an open world in this era of globalization, where there are no more barriers not only for the movement of information, capital, goods, services, humans, but also the state ideology and nationalism.

Globalization of economic and corporate globalization also brings corporate and individual rows of new global players. Five years ago, 51 of the 100 largest economic power is no longer in the hands of countries or territories, but in the hands of corporations.

Revenue Walmart, U.S. retail corporate network, in 2001 already exceeded the gross domestic product (GDP) of Indonesia as a country. Reception oil company Royal Dutch Shell's GDP exceeded Venezuela, one of the members of the Organization of Petroleum Exporting Countries (OPEC) are influential.

Revenues of the world's number one car company from the U.S., General Motors, about the same with a combination of GDP three countries: New Zealand, Ireland, and Hungary. Transnational corporations (TNCs), the world's largest, General Electric, control assets 647.483 billion U.S. dollars, or nearly three times the GDP of Indonesia.

So great was the power of money and influence that these corporations so as to control the decision-making at governmental level and determine the direction of movement of trade and the global economy.

In the early 1990s there were 37,000 TNCs with about 170,000 affiliated companies spread around the world. In 2004 the number increased to about 70,000 TNCs with 690,000 affiliates total. About 75 percent of these TNCs based in North America, Western Europe, and Japan, and 99 of the 100 largest TNCs from developed countries as well.

However, the recent world-class players from developing countries, particularly Asia, began to swell here and there. In the list of 100 largest nonfinancial TNCs world (by assets) version of the World Investment Report 2005, there were names such as Hutchison Whampoa Limited (order 16) from Hong Kong, SingTel Ltd (66) from Singapore, Petronas (72) from Malaysia, and Samsung (99 ) from South Korea.

While the list of the 50 largest financial TNCs world, there are three representatives from China, the Industrial & Commercial Bank of China (sequence 23), Bank of China (34), and China Construction Bank (39).

Big leap

According to data from United Nations Conference on Trade and Development, in 2004 China was the third largest exporter in the world for goods (merchandise goods) and the ninth largest commercial service, with a share of 9 and 2.8 percent of total world exports.

China's export volume reached 325 billion U.S. dollars in 2002 and last year 764 billion U.S. dollars. Manufacturing accounted for 39 percent of Chinese GDP. China's manufacturing output in 2003 was the third biggest after the U.S. and Japan. In the service sector, China's ninth largest after U.S., Japan, Germany, Britain, France, Italy, Canada, and Spain.

While India ranked 20th exporter of merchandise goods (1.1 percent) and ranked 22 for commercial services (1.5 percent). Gross national product (GNP) by 2050 China is estimated to 175 percent of U.S. GNP, while the GNP of India is about to equal the U.S. and making it the world's third largest economy, defeating the European Union and Japan.

When China opened itself to the world two decades ago, people only imagine the potential of China as a market giant with more than a billion consumers making it very attractive to retail companies and manufacturing world. Later, China not only attract and grow as a market, but also as a production base for manufacturing products to supply the global market. China earlier this 21st century such as Britain and the 19th century.

China does not stop here. If in the early 1990s were seen as attractive locations for production base of simple labor-intensive products, today's China is also proving competitive in technologically advanced industries. The entry of China in the membership of the World Trade Organization (WTO) is increasingly clear the way for the Bamboo Curtain country is to become an increasingly difficult to surpass the strength in global markets.

In labor-intensive sectors, like textiles and apparel, an end to the quota regime in the developed countries make Chinese exports flooding the world market and make a lot of textile and apparel industries in some developing countries must close competitors. The share of clothing exports from China is expected to soar from about 17 percent of current total world exports to 45 percent in the second half of this decade.

Something similar occurs in high-tech products. How China invaded and flooded global markets with its products, by displacing the competitor countries, can be seen from the following WTO data.

China's electronic market share in the USA increased from 9.5 percent (in 1992) to 21.8 percent (1999). While at the same time, Singapore's share fell from 21.8 percent to 13.4 percent. Chinese contribution to world production of personal computers rose from 4 percent (1996) to 21 percent (2000), while the contribution of ASEAN as a whole at the same time period shrank from 17 percent to 6 percent.

China share of total world production of hard disk space also rose from 1 percent (1996) to 6 percent (2000), while the ASEAN share dropped from 83 percent to 77 percent. The share of China for the production of the keyboard up from 18 percent (1996) to 38 percent (2000), while the ASEAN share eroded from 57 percent to 42 percent.

All images clearly show that China continues to the next grade, making a big leap from time to time, and at the same time continue to expand product and market diversification. Mop-up movement by China in various industries-ranging from very simple technology intensity until the intensity of technology and high value-added is increasingly reinforce China's position as the world's factory into the 21st century.

While at the same time, its neighboring countries on the other hand had a hollowing out of high-tech manufacturing industry quickly. In low technology intensity industries that tend to labor-intensive, China pressed countries like Vietnam and Indonesia are still narrow industrial base, the technology that is not too complicated and low added value.

While in high technology intensity industries, China is increasingly becoming a threat not only for countries such as Taiwan and South Korea, but also U.S. and Japan. China not only flooding the world with garments, shoes, and toys, but also computer products, cameras, televisions, and so forth.

China supplies 50 percent more production of the world's cameras, 30 percent of air conditioning (air conditioners / AC), 30 percent television, 25 percent washing machines, refrigerators 20 percent, and many more.

Innovation

How China can do it all? There are several factors. First, foreign technology companies, according to Deloitte Research, is currently competing in to investment in China, among others, in order to take advantage of market access to China's huge and growing rapidly. Second, local companies that attract capital from overseas Chinese investors (especially Taiwan) is also more skilled at producing high-tech goods.

No static at labor-intensive industries that rely on cheap labor, China is now becoming more selective in investment led to the industry that produces high-end products and capital intensive. This is partly to reduce dependency on cheap labor that began to decrease availability.

Third, universities in China able to print a line of new engineers in large numbers each year, with wages that are relatively cheap compared to if it would hire a foreign engineer. Each year, the country produces 2 million-2, 5 million graduates, with 60 percent of technology majors (engineers). For comparison, in Indonesia, a graduate majoring in technology, only 18 percent, U.S. 25 percent, and India 50 percent.

To support the growth of high technology industry, capital-intensive to produce high end products, the Chinese government is also aggressively pushing the various activities of research and development (R & D), in line with its ambition to be The Fastest Growing Innovation Centre of the World, with stages, strategies, and implementation very clear to get there.

Almost in every provincial capital there are R & D center it. Positioning strategy indicates China began to enter the second round in its economic development.

Third, this country has a relatively excellent infrastructure to transport components and goods from outside and also around the country. China, with 1.3 billion population, has 88,775 kilometers of arterial roads and 100,000 kilometers of highways, or the ratio of road length of 1384 kilometers per million population.

In comparison, Indonesia with 220 million new residents have 26,000 kilometers of arterial roads and highways 620 kilometers (121 miles per million population). That, too, mostly in damaged condition. China's ports have been able to serve one-fifth the volume of container world and this country continues to build toll roads and new ports.

Fourth, government policies are very supportive, including investment licensing, taxation, and customs. Fifth, the development of special economic zones (20 zones) as an engine of economic growth so that economic development can be more focused and also more efficient infrastructure development.

The result, in 2004 China attracted foreign direct investment 60.6 billion U.S. dollars and 500 of the world's largest company is almost entirely invested there. How competitive China can be seen in the table. Here seems China is already taking into account all the aspects to be able to compete and win the 21st century in his hand.

Something similar happened in India is experiencing rapid growth since the liberalization program to dismantle "License raj" in the era Finance Minister Manmohan Singh in 1991. India has now entered the second stage of economic development strategy using information technology (IT) as the basis for economic development.

Almost the entire cast of IT business world has opened its business in India, especially in Bangalore. In 2006, revenue from IT India reached 36 billion U.S. dollars. Malaysia, Thailand and the Philippines also moved into products that have levels of more complex technology and high added value. Singapore and South Korea lead the information technology and product design.

Pragmatism

What about Indonesia? The principle of globalization is the division of labor to achieve efficiency. The indication that Indonesia with abundant labor and cheap labor just goto the industry "sweat" (sweatshops), such as apparel and footwear in the chain of global production, largely proven true.

China, India, and Malaysia also started with the sweatshops, but then was able to upgrade the industry quickly. This is not the case in Indonesia. Indonesia faces its own policy of globalization far more based on the attitude of pragmatism.

Executive Director of the Centre for Strategic and International Studies (CSIS) Soesastro (Globalization: Challenge for Indonesia) said the policy of government in the face of globalization is not based on ideological considerations, but rather on an objective assessment of what can be achieved countries of East Asia other.

Moreover, at that time among the countries in Asia alone there is competition, racing to liberalize its economy to make it more attractive for global investment. This momentum is driven more by the emergence of regional economic cooperation agreements such as AFTA and APEC.

The government believes through liberalization of markets, industries and companies in Indonesia will be able to become internationally competitive. Since the mid-1980s, Indonesia has begun to liberalize and menderegulasikan trade and investment regime.

During the period 1986-1990, no fewer than 20 packages of trade and investment liberalization policies launched. Indonesia is the only country in East Asia which began a program of economic liberalization with liberalization of foreign exchange regime.

However, in many cases, the government pursued a policy package to encourage the private sector at that time tended to be reactive and not coherent and discriminatory because often times do not include a group or a particular sector of the deregulation program. So, do not encourage healthy competition.

Entrepreneurs grow and not because he menggurita efficient and competitive, but because he managed to control assets and economic resources, because of the privileges or corruption by the ruling.

Indonesia now seem increasingly shaky deal with globalization, especially in the midst of pressure on the domestic nationalist sentiment. In the government itself, because it considers already successfully implementing the first phase of liberalization (first-order adjustment) economy, the government tends to consider trivial challenges that wait in front of the eye.

This is reflected in the attitude taken for granted and tend to think short. In fact, the challenge will be heavier and more complex in line with the deepening of international integration. Not yet clear how the economy and the nation is facing greater competition that can no longer be dammed.

If China is the world's factory and India who is now a paradise world of IT outsourcing scramble into the world center of innovation, manufacturing hub, or other dreams, Indonesia has yet dared to declare to be anything or take any role in the future. If Indonesia is unable to empower themselves and help themselves and let themselves run over by globalization, forever this nation will only become a seamstress and labor.

According to one panelist, Indonesia needs right now is visioning, repositioning strategy, and leadership. Without it all, we will never move from the transformation that continues to spin. With clear vision, the stages are also clear, and the commitment of all parties and strong leadership to achieve that, the year 2030 is not impossible that Indonesia could well rise again become a nation that is more dignified and empowered as a winner in globalization.

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