Indonesia Has ‘Very Strong Role’ in Asean Economic Community
Indonesia Has ‘Very Strong Role’ in AEC (Asean Economic Community), BCG (Boston Consulting Group) Chairman Says
The three-day World Economic Forum on East Asia 2014 gets underway in Manila on Wednesday, bringing more than 600 leaders, thinkers and entrepreneurs together.
Among other issues, they will discuss how best to prepare the 10-member Association of Southeast Asian Nations for the Asean Economic Community planned for next year, which is to allow freer flows of capital and lower trade barriers.
Combined, the Asean member states form one of the biggest economies in Asia, with gross domestic product at about $2 trillion and a population of more than 600 million people.
Indonesia, as the biggest economy in Southeast Asia, can take advantage of freer trade under the AEC. Its automotive sector can assemble and ship cars locally and internationally, rivaling Thailand’s. Japanese vehicle makers have been increasing their investments in Indonesia recently, recognizing that demand for cars, trucks and motorcycles remains strong. The nation’s youthful population and cheap labor costs make it an attractive investment destination for such overseas companies as Foxconn Technology Group, which makes iPhones and iPads for Apple.
Jakarta next year will be the host for the WEF (World Economic Forum) on East Asia, but business executive Hans-Paul Buerkner, chairman of The Boston Consulting Group, has already made the city one of his two home bases — the other being Frankfurt — and that underscores the importance of Indonesia’s role in Southeast Asia and the global community.
Buerkner said in an interview with the Jakarta Globe last week that opening up the market in the region can help drive competitiveness for Indonesian companies.
“If you don’t expose yourself to competitive challenges, you may not make the efforts needed,” he said. “That’s the gist of it. Continuously changing, more efficiency, improve your pricing, improve the supply chain, how can you train your people better — it’s a constant effort needed to be better and to be different.”
Still, at least one legislator expressed concern about Indonesia’s preparedness ahead of the AEC, while another lawmaker said that the government should learn from the experience of the implementation of the Asean-China Free Trade Area in 2010, which led to a flood of cheap imports from China.
Indonesia, with a population of more than 250 million people, faces many challenges in order to move up into developed-nation status. Recently the World Bank designated Indonesia as the 10th biggest economy in the world in terms of purchasing power parity. Yet the bank’s own data from 2011 suggest that poverty remains a problem, with 43 percent of the population living on less than $2 a day. More and more Indonesians, though, will break into middle-income status as people increasingly move to cities from rural areas, leaving farming jobs for employment in the manufacturing and services sectors.
While some companies may not be prepared for the AEC, others will be, and it is these companies that will grow, Buerkner said.
“It’s very good for Asean to use the 600-million market to develop the whole region. Indonesia is half of that region so it plays a very strong role. The more you open up and the more the region opens up, the more everybody can benefit in the development,” he said.
Buerkner likened the experience of Europe before the European Union, in which countries were competing with each other rather than cooperating. The same would apply to the AEC in trying to achieve the same kind of union and attract investment.
“Indonesia has the key ingredients, but you have to put these ingredients together and up your game,” he said. “Many countries are coming to invest. We’ve seen massive interest from Japanese companies here, not just to sell here, but also to import from here. That’s why opening the market is a very important turning point, much like the European Union was a very important attraction for investors from America to invest in Europe. Before that, countries were competing with each other. Now you have a larger reach in market. There’s an alternative to investing in India or China.”
The BCG chairman added that this doesn’t mean that every company will come to Indonesia, as some will head to countries like Vietnam or Myanmar. “But Indonesia will always be a central element to Asean, and the more you leverage this, the better,” Buerkner said.
Source: Dominic G. Diongson & Vanesha Manuturi / The Jakarta Globe