Regional Integration:
A Question Mark for Indonesia
Irwanda Wisnu Wardhana
The Indonesia MOF Researcher

The Hitotsubashi University Alumni Seminar
Jakarta, 16th June 2016

Indonesia: a Potential Asia’s Emerging Power Indonesia is the biggest economy in ASEAN and the16th largest economy in the world.
 It has the largest population in ASEAN and the 4thlargest in the world.
 The 3rd largest democratic country as well as a home
for the largest Muslim population in the world.
 A resilient country amid 2008-2009 global financial
crisis, supported by 60% of domestic consumption.

 Has Indonesia materialized its potential?
2GDP and Population: a Dominant Player[ASEAN GDP, 2014]
Myanmar;
2.5%
Cambodia;
0.7%[ASEAN Population, 2014]

Lao PDR; Brunei; 0.6%
0.5%
Vietnam;
7.5%

Philippines;
11.5%

Myanmar
8.6%

Vietnam
14.8%
Indonesia;
35.9%

Malaysia;
13.2%

Source : World Economic Outlook Database, IMF

Malaysia
4.8%
Cambodia
2.5%
Lao PDR
1.1%
Brunei
0.1%

Philippines
16%

Thailand;
15.1%

Singapore;
12.4%

Thailand
10.8%

Singapore
0.9%

Indonesia
40.5%

Source : United Nations Department of Economic andSocial Affairs

 ASEAN’s GDP reached USD888.65 billion (2014)
 ASEAN member countries have population ofapproximately 600 million (2014)

3Competitiveness: Lagging Behind

GLOBAL COMPETITIVENESS INDEX(2014-2015)
Singapore
Malaysia
Brunei Darussalam
ThailandIndonesia

220263134(GCI, World Economic Forum)

LOGISTIC PERFORMANCE INDEX(2014)
Singapore
Malaysia
Thailand
VietnamIndonesia(World Bank 2014)

5253548
53

EASE OF DOING BUSINESS (2015)
Singapore
1Malaysia
18Thailand
26Vietnam
78
Philippines
95
Brunei Darussalam101Indonesia
114(World Bank 2015)

4

The Largest Market: Destined to be a Market?

• Increasing number of a large-vibrant and consuming
middle class.
• Strong presence of regional business entities andbrands in numerous business sectors.

Source: McKinsey

5

Opportunity: Regional Value Chain
 Indonesia has the potential to take advantage of theRVC by enlarging the existing industry i.e. automotive,
textile, and processed food.
 It can focus on industrial segments that arecomparatively better than the rest.
 Indonesia has a high role for some products of RVC
such as chemical, rubber, plastic products, foodproducts, upstream textile, jewelry, and metalproducts.

6

Shortcomings and Problems

 Shortage of skilled labors and lack of English
speaking skill.
 Increasing labor costs.
 Low level of technology utilization.
 The existing industry has an inward looking anddomestic orientation.
 Low awareness toward the regional integration.

7

Competitiveness Improvement: Is it Enough?
 Economic
launched.

Deregulation

Packages

havebeen The government is aiming to complete ambitious
infrastructure projects such as power plants, highspeed trains, and tollways.
 Business barriers have been reduced to attract moreinvestors.
 However, the impacts of such measures have yet tobe examined.
8

ASEAN Studies Center: Brains to Compete
1. University of Gadjah Mada
2. University of Airlangga
3. University of Indonesia
4. University of Hasanuddin
5. University of Andalas
6. University of Brawijaya
7. University of Sam Ratulangi
8. University of Padjadjaran
9. University of Mulawarman
10. University of Pattimura
11. University of Udayana
12. University of 17 Agustus
13. London School of Public
Relations
14. University of Wiraja
15. University of Prof. Dr.
Hazairin, SH16. University of Dayanu
Ikhsanudin;
17. University of Pesantren
Tinggi Darul ‘Ulum
18. University of Pasundan
19. University of Garut;
20. University of Negeri
Semarang
9Thank you10