How Much Indonesia Needs?

Posted on June 21st, 2009 at 9:59 am by Ian


It’s been quite often I posted entries about GDP growth. I had one good question from one reader in New Zealand, on how to make Indonesia grow at 7% to 8% pace per year?

There’s one Indonesian presidential candidate who shared with us that ”Indonesia should become an economically independent” to achieve that growth. Sounds interesting, right? Wrong! There’s no such nation which is economically independent. The U.S. would collapse within months if there’s no energy supply from the oil countries; Japan and China would also. Singapore would no more be a hot spot in Southeast Asia, if they cannot sell domestic products globally.

So, there’s no difference with Indonesia. Indonesian economy must grow to catch-up with growing population (and inflation); Indonesia needs money to grow. Indonesia, the Economist says, needs at least $150 billion in investment for the next 5 years to make economy grow 7-8% a year. While government has allocated (only) $20 billion, so where the remaining $130 billion will be resourced from?

It should come from FDI (Foreign Direct Investment). Indonesia is estimated to get (only) $ 45 billion in FDI for the next 5 years. Still another $65 billion to go, or $13 billion a year. Where will we get it? Use domestic banks to support grants, bonds, loans, or other means. Can Indonesia do it?

To achieve 7% growth, FDI to GDP ratio is 27%. Wanna go 8%? Then we need 32% ratio. 10% growth needs 40%. Seems impossible?

Nothing is impossible! I am sure, somehow, Indonesia will achieve that target. Let’s work really hard.

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