Two ministers are having a row over a lame, but increasingly serious, issue. They are publicly arguing whether public servants (and Indonesians at large) should be made mandatory (encouraged) to wear Indonesian made shoes. As the issue escalates, it opens up more interesting debate on protectionism and liberalism (free trade).
It all begins with the sub-prime crisis at the end of 2008. As the result, 2009 has been dubbed as the most difficult time for business since the beginning of new millinneum. Most countries suffer from rising unemployment, increasing tendency for protectionism, contraction in economic growth, and increasing demand for state intervention in the economy – which also leads to debate on the new relevance of Keynesian economics in the globalizing Neo Classical world.
In Asia, only three countries are predicted to grow in a positive direction, despite at a much discounted rate, namely China, India and Indonesia. The three countries are enjoying 4-7% growth which stems primarily from their economy’s resilience to external shocks and, of course, thanks to their large domestic markets. An analysis said that the three countries share between themselves a market size of about 2.5 billion customers.
Indonesia is an interesting case. In addition to having a sizebable domestic demand to fuel growth, it will also host the biggest democratic general election in the world, mid of this year. Political parties and law makers wannabes will spend horrendousely to win a vote from almost 100 million voters. Malaysia, Thailand and Singapore are already in the recession, or at least growing at zero rate.
Their misery come largely from their dependency to export of high-end commodities or manufacturing products to the US and the EU, which since last year had reduced their imports signifiacantly. And with the Obama administration launched a “Buy America” campaign last week, the blow to these economies (and most of the Asian exporters) worsened.
Thus, being the only countries to enjoy positive growth and being endowed with undeniably huge (I mean really-really huge!) markets, it is very likely that many countries will target Asia’s big three (India-China-Indonesia – can we name them ICI??) for their exports. This is already happening, although there is another possibility where the three countries are also eyeing each other’s market. For instance, Indonesia is seeing a rising influx of Chinese products into its shore.
Now, what about Indonesia? Does it has capacity to open a hole in the strongly protected Chinese markets? Or India’s? Or, would it rather go on the defensive? My gut feeling tells me that Indonesia will choose the latter.
The row between Minister of Trade with Minister of Industry is a tip of the iceberg for such differences among Indonesia’s elites. It has become a public knowldge that Indonesia is torn between free traders cum liberal economic thinking with that of nationalist-pro poor/people economics.
I will not pass any judgement nor will I reveal my own inclination here in this note – well, not until I know for sure the real danger or merits of both, given the growing anxiety over the global crisis and its impact to the country. Then again, no one can confidently say that the global economy will recover next year, nor can anyone pronounce that the crisis will endure for another 2-3 years.
So, I will save my bet till then. The question I am interested to hear is whether it makes an economic/business sense to promote a ‘buy America’ or ‘buy Indonesia’ standpoint in this globalized but currently distressed world. Or simply put, is it worth it to be a protectionist? Are you for Mari Pangestu or Fahmi Idris? 🙂
Originally published on luqyantamanni.wordpress.com, February 21, 2009: view original.
