Indonesia And Its Past Economic Crisis Economics Essay

Ind championsia And Its Past sparing Crisis Economics raiseInd isia is one of the nearly promising and fast developing countries in the world. subsequently the financial crisis in 1997, this untaught has managed to plant the great pace of victimisation and to ferment one of the worlds leading economies. It has become possible because of the combination of ingrained and external factors and reason equal to(p) macro frugal policy of the organisation. The economic and geopolitical capability of Indonesia is tremendous. It has a stria of natural and human resources, large authority commercialize and appropriate corporate and organizational culture of doing business organisation. It withal rely down(p) on exports, hence Indonesia performed better riding through slump. Exports ar identical to only approximately 25% of gross domestic product, comp bed with over 100% in Malaysia in 2008. Moreover, Indonesias core exports are dominated by gas, oil and coal, so the country was less exposed to the sudden and drastic destocking that caused trade in construct goods in Asia to dry up in late 2008 (Indrawati 2009).The countrys $514 billion economy, which is the biggest in South Asia, has 240 million citizens. It convey that the country is a great potential securities industry in terms of domestic consumption. An emerging middle track (35 million) is driving the economic growth in the country. It means that the country is able to create demand for the goods and services provided not only by theme manufacturers, exclusively alike by multinational companies. The middle class creates not only an attractive commercialise for multinational companies, but also a basis for the exploitation of sm entirely business. Under modern circumstances, small business is a foundation for an effective economy. It creates new working places, contributes to the national gross domestic product and makes the national economy more flexible and resistant to crisis and fluc tuations.Indonesia is also luxuriant in different natural resources. The country is the worlds leader in the export of coal. It has the largest gold mine and the single largest reserve of recoverable copper. As we eject see, export is an integral part of the countrys success. On the one hand, it creates a bunch of benefits for Indonesia. However, on the other hand, it makes the countrys national economy dependent on the particular on global markets. Fluctuations in these markets may hinder the festering of the country.This dapple however may be improved by having a higher(prenominal) share of value-added goods. These goods are produced by using educated labor repulse, familiarity and IT technologies. Thus, Indonesia forget be able to occupy another niche in the global market and make its economy more competitive.It will also make the cultivation of the country more intensive. One should mention that the catamenia ripening has an extensive character. The development tha t has an extensive character is based on the use of resources, labor force, etc. At the same time, intensive development is based on innovations, investments, production of high value-added goods.The country also has slightly geopolitical advantages. It is close to China and Japan its biggest export markets. It means that accomplishment costs are insignificant. As a result, the efficiency of business is increasing. Moreover, these countries are not only Indonesias biggest partners, but also some of the biggest markets of the world.The combination of all the above-mentioned factors leads the country to the status of one of the best-performing economies in the world. According to the experts, the national economy of the country is overtaking to grow 6 percent this year. It will make it the best-performing economy after China and India. The current GDP per capita is just about $4.000 in Indonesia. Respectively GDP of Indonesia was about $960 billion in 2009 (Indonesia GDP Per Ca pita (PPP)).According to the experts, Indonesia should be included in BRIC club in the warm future.Probably, we should explain what the so-called BRIC club is. The BRIC thesis posits that China and India will become the worlds dominant suppliers of manufactured goods and services, respectively, while Brazil and Russia will become similarly dominant as suppliers of raw materials (Brazil, Russia, India And China BRIC).It only proves our assumption that one of the strong sides of the countrys economy is its export of raw materials, including coal, metals, etc. However, as we make already mentioned, the share of these raw materials should reduce in the nearest future. macrocosm a powerful country in the worlds economy also means being a leader in the worlds politics. Thus, the political influence of Indonesia in the world is also going to grow. At least in the Asiatic region, it is expected to happen very soon.We have said a lot about the countrys competitive advantages. Now it is t ime to analyze the potential jeopardize factors that may scare the foreign investors and hinder the sustainable development of Indonesia. premier of all, one should mention terrorism among the disadvantages that create risks for investors. Terrorist attacks in Jakarta and other similar countries scare foreign investors and thus hinder the economic development of such countries. Islamist terrorist actions have always been usual for the country. Foreign companies do not have any desire to invest in a country, where their facilities may be destroyed or their managers and workers may be killed.That is why deciding(prenominal) steps should be taken to solve this conundrum. Such steps are currently being made. The current government of the country is fighting against Islamist terrorist factions. However, its efforts should be combined with the assistance of the international community. We believe that this risk factor is going to be eliminated in the nearest future.Another risk factor is potentially risk of exposureous natural factors. We mean, for vitrine, tsunami in 2004 that killed a lot of commonwealth and floor the world. In fact, there is a risk that such a catastrophe may occur again.The scope of that cataclysm can be set forth by the following words. Massive sea surges triggered by an earthquake beneath the Indian Ocean have killed over 10,000 people in southerly Asia, with many more feared dead. Indonesia is thought to be the worst- collide with country in the region, with 94,000 dead, 132,000 lose and 132,000 (Government of Indonesia 2005).Possible consequences of natural disasters may be the following death of thousands of people (labor force and intellectual potential) destruction of infrastructure destruction of material objects, including factories, offices, etc. expenditure of billions of dollars on reconstruction of the country, etc. In general, it, of course, hinders the sustainable development of the countrys economy. This factor should be taken into account by the investors in Indonesias economy.not only does the country have to fight against possible natural disasters, but it also has to handle other problems related to the natural environment, including climate miscellanea and depletion of natural resources. It can be proven by the following quote. The government in 2010 faces the ongoing challenge of improving Indonesias insufficient infrastructure to re act impediments to economic growth, while addressing climate change mitigation and adaptation needs, peculiarly with regard to conserving Indonesias forests and peatlands (Indonesia Economy 2010). later comparing the advantages and disadvantages of Indonesias economy, we have to talk about the main problems of its current state and prospects for the near future.Nowadays the main problem of Indonesias economy and financial system is a danger that its financial market may be hot up. It is essential to take this factor into account because a few years ago it caused a lot of problems.Ten years of growth resulted in the financial crisis in 1997. One of the reasons was the overheated regional financial market, including that of Indonesia.The influence of that financial crisis on the national economy was enormous. After an average annual rate of between 5% and 7% during a long-term growth in the last two decades, Indonesia has been hard hit during the recent wave of the Asian monetary crisis. With an economic growth of 4.7% in 1997, the 1998/99 State Budget envisages a minus 12% economic growth with an inflation of 66%, which gradually developed into an economic crisis (Indonesias Economy. Economic Growth and State Finance).That is why it is very important to evaluate whether the market is overheated now or not in order to neutralise a similar crisis.We believe that we have to explain the term overheated market. It means that market prices of different assets, including stocks, raw materials, etc., do not equip to their fundamental prices . Thus, the assets are overestimated and the so-called bubbles are formed because of some risky tendencies. When investors realize that the assets are overestimated, the whole system ruins, creating terrible consequences. As a result, the whole national economy is harmed.The most recent and vivid example of such a cataclysm is the global financial crisis 2008-2010 that was caused by the bubbles in the markets of leading assets. Despite that fact, the tendencies for such bubbles to form are still ascertained in the global economy.Thus, to conclude, we would like to say the following. Despite the crisis in 1997-1998, Indonesia has managed to demonstrate the rapid pace of economic development in the past decade. As a result, nowadays a lot of people tend to treat Indonesias economy as one of the most promising economies in the world. We also support this opinion and believe that its economy is going to become one of the leading ones.It is possible because of the combination of the cou ntrys advantages and effective governments policy. The countrys advantages are the following practiced geopolitical location rich natural resources cheap labor force large internal market.The government economic policy is based on the use of liberal principles that are traditional in the developed countries. The most important thing is that the countrys leaders desire to see their country as an innovative and prosperous state.The countrys economy may also be characterized by some risks, among which some of the most important are a danger of terrorism and possibility of natural disasters. These risks should be taken into account by investors and internal policy makers because they are able to hinder the sustainable development of the country. If they cannot be avoided, they should be forecasted and minimized.