Indonesia - Asia’s Stumbling Giant

CASE 1

INDONESIA- ASIA’S STUMBLING GIANT

Summary

The case takes us to an economy and the implications that affected by the wrong policies and regulations. Indonesia has ruled by Suharto for the span of 30 years by using the military establishment. This leads to Indonesia for a poor economic condition. The corruption is so deeply associated with the government officials, so for the common government functions they ask for the bribes. He time was with absolutism and crony capitalism, used his power and his political system to favor the businesses of his supporters and family. During that time country’s infrastructure was poor. The infrastructure investment was low for years and this resulted in the poor connectivity of the people and land and foreign investors reluctant to invest in Indonesia, because of corruption, red tape and poor infrastructure. Many companies exited from the country because of these reasons.

Later, Indonesia started growing under the new leadership but long way to go to tap their actual potential. They have to concentrate on the unemployment rate and also the corruption, which are the keys for the economy.

Problems

I believe that, the main reason is corruption. The corruption is so deeply associated with the government workers, to give sanctions for the project, they need to get the bribes which leads to the extra cost for the investors. The next reason is poor infrastructure, for a better investment friendly condition, better connectivity of rail, road system, electricity etc. are needed. If a better basic rail, road, electricity available then the investors will be attracted to the country, unfortunately because of the low investment in the infrastructure, companies showed less interest on Indonesia as well as the companies, which are already worked there exited from the country.

The other reason is red tape. The legal system made the procedure lengthier at the same time neighboring countries developed their infrastructure with more friendly investment opportunities forced the companies to exit from Indonesia. The exit of the companies increased the unemployment rate and this is badly affected the economy.

Questions

1. What political factors explain Indonesia’s poor economic performance? What economic factors? Are these two related?

There are many political factors for the Indonesia’s poor economic performance. The number one factor is corruption. The corruption is so deeply associated with the government bureaucrats, so for the common government functions they will ask for the bribes. The second factors is red tape. The rules and regulations are to be implemented by the government officials, if they are corrupted, there will be delay in