Based on GDP, Indonesia is one of World’s 10th-largest economy

World’s 10th-largest economy behind peers

Business news : from Jakpost

Indonesia’s position as the world’s 10th-largest economy, according to a 2011 report, immediately dims among Southeast Asian peers, such as Malaysia and Thailand, when it comes to gross domestic product (GDP) per capita.

In the 2011 World Bank-affiliated International Comparison Program (ICP) report, Indonesia — the region’s largest country in terms of economy and population — recorded US$2,058 billion in GDP expenditure and $8,539 in GDP expenditure per capita.

Malaysia’s GDP expenditure was only $606 billion but its GDP expenditure per capita was more than two times that of Indonesia, at $20,926, the report said. Meanwhile, Brunei was among five economies with the highest GDP per capita, after Qatar, Macau, Luxembourg and Kuwait.

The ICP report used purchasing power parity (PPP), not exchange rates, for international GDP comparisons, as exchange rate-based GDP figures can be highly misleading in indicating the relative size of an economy and level of material well-being.

For example, if the price of a hamburger in France is ¤4.80 (US$6.65) and in the United States it is $4.00, the PPP for hamburgers between the two economies is 83 US cents to the euro from a French perspective, and ¤1.20 to the dollar from a US perspective. In other words, for every euro spent on hamburgers in France, 83 US cents would have to be spent in the United States to obtain the same quantity and quality.

Trade Minister Muhammad Lutfi said on Monday there was nothing wrong about having high consumption, which primarily drove Indonesia’s economy given its huge population. “In fact, people come to invest here […] because they have good prospects in Indonesia,” he said.

“Look at Thailand’s automotive sector. It’s not working. [Investors] eventually move here,” he said, adding that a small market like Thailand could not serve major investors supplying larger economies like Indonesia.

Standard Chartered senior economist Fauzi Ichsan said Indonesia’s high consumption was attractive only to investors in fast-moving consumer goods, retail banking, pharmaceuticals and the automotive sector, while the commodity and infrastructure sectors were affected by high political uncertainty.
Tony Prasetiantono, director of the Center for Economic and Public Policy Studies at Gadjah Mada University (UGM) in Yogyakarta, said Indonesia had a weak industry structure that was too dependent on imports.

“As Indonesians become better off, they shop for imported products that our domestic industries don’t produce,” he told The Jakarta Post.

Only by developing manufacturing, the agricultural sector and infrastructure, which absorbed a high amount of manpower, could Indonesia increase its GDP per capita and reduce income inequality, he said.

Thailand’s income per capita was higher than Indonesia, he said, due to its successful industrialization, while Malaysia was successful in developing its non-food agricultural sector.

Fauzi, however, said wealth inequality was more pertinent than income inequality because it could trigger political instability.

“The rich get richer because the value of their assets increases, whereas the poor have no assets to begin with,” he said. (ask)

Source : Jakpost


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