Economy Overview

?The shallow waters of the Southeast Asian coral reefs have the highest levels of biodiversity for the world’s marine ecosystems, where coral, fish and molluscs abound. According to Conservation International, marine surveys suggest that the marine life diversity in the Raja Ampat area is the highest recorded on Earth. Southeast Asia was a critical part of the world trading system. Tourism has been a key factor in economic development for many Southeast Asian countries, especially Cambodia.

According to UNESCO, “tourism, if correctly conceived, can be a tremendous development tool and an effective means of preserving the cultural diversity of our planet. ” Since the early 1990s, “even the non-ASEAN nations such as Cambodia, Laos, Vietnam and Burma, where the income derived from tourism is low, are attempting to expand their own tourism industries. ” In 1995, Singapore was the regional leader in tourism receipts relative to GDP at over 8%.

By 1998, those receipts had dropped to less than 6% of GDP while Thailand and Lao PDR increased receipts to over 7%. Since 2000, Cambodia has surpassed all other ASEAN countries and generated almost 15% of its GDP from tourism in 2006. Indonesia is the only member of G-20 major economies and considered as the largest economy in the region. [31] Indonesia’s estimated gross domestic product (nominal) for 2008 was US$511. 7 billion with estimated nominal per capita GDP was US$2,246, and per capita GDP PPP was US$3,979 (international dollars).

Stock markets in Southeast Asia have performed better than other bourses in the Asia-Pacific region in 2010, with the Philippines’ PSE leading the way with 22 percent growth, followed by Thailand’s SET with 21 percent and Indonesia’s JKSE with 19 percent. Indonesia is the largest economy in Southeast Asia and is one of the emerging market economies of the world. The country is also a member of G-20 major economies. It has a market economy in which the government plays a significant role by owning more than 164 enterprises and administers prices on several basic goods, including fuel, rice, and electricity.

In the aftermath of the financial and economic crisis that began in mid-1997, the government took custody of a significant portion of private sector assets through acquisition of nonperforming bank loans and corporate assets through the debt restructuring process. Since 2004, the national economy has recovered and undergone another period of rapid economic growth. Domestic consumption is one of the major driving forces behind the country’s economic growth. The economic growth slowed considerably during 2007-08.

However, like India and China, Indonesia recorded higher growth during the globalfinancial crisis, compared to the other G20 members. Challenges Labor unrest As of 2011 labor militancy was increasing in Indonesia with a major strike at the Grasberg mine and numerous strikes elsewhere. A common issue was attempts by foreign-owned enterprises to evade Indonesia’s strict labor laws by calling their employees contract workers. The New York Times expressed concern that Indonesia’s cheap labor advantage might be lost. However, a large pool of unemployed who will accept substandard wages and conditions remains available.

One factor in the increase of militancy is increased awareness via the internet of prevailing wages in other countries and the generous profits foreign companies are making in Indonesia. [51] Inequality Poverty rate has since been higher in the outer islands. Java, Bali, and Sumatra have benefited more due to the rise of manufacturing and better infrastructure of the inner islands. Economic disparity and the flow of natural resource profits to Jakarta has led to discontent and even contributed to separatist movements in areas such as Aceh and Irian Jaya.

Geographically, the poorest fifth regions account for just 8% of consumption, while the richest fifth account for 45%. While there are new laws on decentralization that may address the problem of uneven growth and satisfaction partially, there are many hindrances in putting this new policy into practice. At the Indonesian Chamber of Commerce and Industry (Kadin) meeting at Makassar on April 2011, Disadvantaged Regions Minister said there are 184 regencies classified as disadvantaged areas in Indonesia with around 120 regencies were located in the eastern part of Indonesia.

Inflation Inflation has long been another problem in Indonesia. Because of political turmoil, the country had once suffered hyperinflation, with 1,000% annual inflation between 1964 and 1967,[53] and this had been enough to create severe poverty and hunger. [54] Even though the economy recovered very quickly during the first decade of New Order administration (1970–1981), never once was the inflation less than 10% annually. The inflation slowed during mid-1980s, however, the economy was also languid due to the decrease of oil price that reduced its export revenue dramatically.

The economy was again experiencing rapid growth between 1989-1997 due to the improving export-oriented manufacturing sector, still the inflation rate was higher than economic growth, and this caused widening gap among several Indonesians. The inflation peaked in 1998 during the Asian financial crisis, with over 58%, causing the raise in poverty level as bad as the 1960s crisis. [55]During the economic recovery and growth in recent years, the government has been trying to decline the inflation rate. However, it seems that Indonesian inflation has been affected by the global fluctuation and domestic market competition.

[56] As of 2010, the inflation rate was approximately 7%, when its economic growth was 6% (Note that economic growth rates already take inflation into account, so this comparison by no means implies economic reduction[57]). To date, inflation is affecting Indonesian lower middle class, especially those who can’t afford food after price hikes. [58][59] Vietnam is one of the world’s poorest countries, having suffered from years of war (1940-89) that damaged its economy and basic infrastructure . Thus, economic development is the nation’s highest priority.

It is still largely an agricultural economy, with 72 percent of its workforce engaged in that sector. Much of the country is made up of mountains and forests, with only 17 percent of its land arable. Since implementation of the open-door economic One impact of rapid industrial growth of Vietnam has been that agricultural land is being converted into industrial parks, which reflects the changing economic structure: agriculture’s share of GDP declined to 20. 4% in 2006 from 24. 5% in 2000. (The industry and services sectors contributed more than 90% of total GDP growth in 2007.

) Production of tea, coffee, and natural rubber has driven the strong export performance in agriculture sector. Strong external demand also underpinned growth in the fisheries subsector. Currently Vietnam is the largest producer and exporter of pepper in the world, the second largest exporter of rice (after Thailand), coffee (after Brazil) and cashew nuts (after India), the fourth largest of rubber and seventh largest of tea. The Government is placing increasing emphasis on cash crops with export potential and on building of agro-based industries.

policy,Vietnam has signed cooperative economic and trade agreements with EU (1992), engaged in ASEAN membership (1995) and AFTA, ASEAN Free Trade Agreement (2001), gained APEC admission (1998), sealed a US-Vietnam bilateral trade pact (2001), and won WTO admission as the 150th member of the organization with official recognition on January 11, 2007. Vietnam has suggested the goal of becoming an industrialized country by the year 2020. Thailand is, at present, no longer an agricultural economy. In less than thirty years, Thailand has been transformed from a subsistence agrarian society into a rapidly industrializing free-market country.

Due to an industrial and export-oriented agricultural development policy, the economy has undergone rapid and sustainable growth and has been cited as one of the most successful countries in the developing world over the past two decades. The industrial and the service sectors serve as the two main sectors in the Thai gross domestic product, with the former accounting for 39 percent thereof. Albeit often seen as an agricultural country, Thailand has an agricultural sector which shares only 8. 6 percent of the GDP – lower than the trading sector and the logistics & communication sector which account for 13.

5 percent and 9. 6 percent of the GDP respectively. The construction & mining sector adds 4. 3 percent to the country’s gross domestic product. In addition to this, other service sectors – which include the financial, the educational, the hotel & restaurant sectors etc. – account for 25 percent of the country’s GDP. [5] Thailand is the second largest economy in Southeast Asia, after Indonesia. Concerning the social and development indicators, Thailand is recognized by the World Bank as “one of the great development success stories”.

[15] It is now an upper-middle income country, The economy of Japan is the third largest national economy in the world [8] after the United States and the People’s Republic of Chinaand is the world’s second largest developed economy [9] According to the International Monetary Fund, the country’s per capita GDP (PPP) was at $34,739 or the 25th highest in 2011. Japan is the world’s 3rd largest automobile manufacturing country, has the largest electronics goods industry, and is often ranked among the world’s most innovative countries leading several measures of global patent filings.

[11] Facing increasing competition from China and South Korea, manufacturing in Japan today now focuses primarily on high-tech and precision goods, such as optical equipment, hybrid cars, and robotics. Japan is the world’s largest creditor nation,[12] generally running an annual trade surplus and having a considerable net international investment surplus. As of 2010, Japan possesses 13. 7% of the world’s private financial assets (the 2nd largest in the world) at an estimated $14. 6 trillion. [13] As of 2011, 68 of the Fortune 500 companies are based in Japan.

The economy of Tokyo is the largest metropolitan economy in the world. Japan remains a traditional society with strong social and employment hierarchies – Japanese men have tended to work for the same employer throughout their working lives. But this and other traditions are under pressure as a young generation more inclined towards Western culture and ideas grows up. On the other hand, one of the biggest challenges that successive Japanese governments have faced is how to meet the huge social security costs engendered by an ageing society.

Measures to increase sales tax to this end threatened to split the governing Democratic Party in 2012. Japan-Indonesia Economic Relations With broadly complementary economies, Japan and Indonesia have long enjoyed close interdependent economic ties. The smaller archipelago has played a key role in its larger partner’s economic development since the early 1970s through ODA, FDI (foreign direct investment), bilateral trade, and the transfer of technology and expertise. Indeed, between 1967 and 1999, Indonesia was the largest recipient of Japanese ODA loans, receiving some 3,432 billion yen (around US$30 billion) or 18.

6% of such loans, which were delivered without the hectoring of other donors with regard to human rights. [1] Indonesia was the single largest recipient of Japanese ODA in 2000-2001, and was second behind China in 2002. Whilst levels of Japanese aid to Indonesia have fluctuated somewhat since then, yen loan assistance for the country in fiscal 2007 (until March 31, 2008) amounted to $1 billion. Japan is also Indonesia’s largest creditor with loans of around Rp186. 38 trillion (US$20. 3 billion).

For its part, the relationship has guaranteed Japan a stable supply of natural resources, with Japan being the destination of nearly 70% of Indonesia’s fuel, metal and mineral exports in the last three decades. [2] Particularly with regard to gas, the past, present and future of this association is explored further below. In addition, Japan also accounted for the largest share of Indonesian non-oil and gas exports in January-November 2007 at 14. 6%. [3] Indeed, Indonesian statistics indicate that bilateral trade rose 10. 69% in 2007, up from US$27. 24 billion the previous year.

At present, Japan absorbs around 20% of Indonesia’s total exports, with the balance of trade in Indonesia’s favour at a ratio of around 4:1. These exports are dominated by oil, gas and other resource-based items such as metals, coal, timber and seafood, in addition to small quantities of manufactured goods. Imports from Japan are mostly industrial, capital goods and machinery inputs. In this sense, it might be said that Japan benefits more from the relationship as its exports traditionally command a higher price than primary commodities as a result of value-adding technologies not present in resource-based products.

Despite a decline in recent years, Japanese firms still have more investment in Indonesia than in any other Southeast Asian country, and presently there are around 1,000 Japanese companies operating in Indonesia employing some 280,000 local staff. Excluding oil and gas, figures for 2006 indicate that the biggest targets for Japanese investment in Indonesia were in the electricity and electronic sectors (US$2. 8 billion); automotive and transportation equipment (US$1. 6 billion); mineral and non-metal industries (US$862 million); chemical and pharmaceutical (US$780 million); and trade and repair (US$661 million).

[4] The Indonesian Investment Coordinating Board (BKPM) calculates that between 1967 and 2007 Japanese firms invested some US$40 billion in Indonesia but such inflows have fallen dramatically since 1997. This reflects a relocation of existing Japanese investment from Indonesia to neighbouring countries, Sony being a high profile case, due to a diminishing comparative advantage in labour costs and concerns over the country’s institutional and physical infrastructure. In 2007 Japan ranked fourth in terms of Indonesian FDI inflows. THE JAPANESE-INDONESIA ECONOMIC PARTNERSHIP — “JIEPA”.

The Japan-Indonesia Economic Partnership Agreement (“JIEPA”) is a good deal all around. The agreement highlights a longstanding economic relationship between Japan and Indonesia. More than that, it symbolizes Japan’s investment in the social and economic development of Indonesia, a move that benefits not only Indonesia, but could also prove to have numerous benefits for Japan in the future. The July 1, 2008 JIEPA came into effect the same year that Japan and Indonesia celebrate their 50th anniversary of bilateral diplomatic ties.

The two countries began formal discussions on the JIEPA two years earlier, and the pact was sealed on August 20, 2007 under the leadership of Japanese Prime Minister Abe Shinzo and Indonesian President Susilo Bambang Yudhoyono. While this is Indonesia’s first Economic Partnership Agreement, Japan has had similar agreements with other countries in Southeast Asia which have proven successful. Both Japan and Indonesia have benefited tremendously from one another in the past 50 years. Between 1967 and 1999, Indonesia received 3,432 billion yen in Japanese Official Development Assistance (ODA) loans.

Japan gave more in ODA loans to Indonesia than any other country in 2001 and only more to China in 2002. Receiving the ODA loans have assisted Indonesia in developing universities, railways, and irrigation systems. Furthermore, Japan is Indonesia’s largest creditor with loans totaling $20. 3 billion. Japan has benefited in perhaps even greater ways from the economic ties between the two nations. Currently, around 20% of Indonesia’s total exports go to Japan. These exports are mostly resource-based items like oil, gas, coal, timber, and metals.

On the other hand, Japan exports mostly industrial goods and machine inputs to Indonesia. This difference in types of exports is more advantageous to Japan because their industrial goods and machine inputs command a much higher price than the resource-based materials. Economic ties with Indonesia have ensured Japan a steady supply of natural resources. In the past thirty years, almost 70% of Indonesia’s fuel, mineral, and metal exports have landed on Japanese shores. The implementation of the JIEPA is to designed to strengthen existing economic ties between Japan and Indonesia.

However, the agreement brings about certain changes that may prove to be more profitable to Japan than to Indonesia, especially when taking into consideration the future exchanges that these countries will have with one another. Certainly, the reduction in tariffs is a win-win situation because it will open additional channels for trade. Tariff-free trade between Japan and Indonesia will reach 92% (by value). Indonesia will work to eliminate virtually all tariffs on Japanese products and has already abolished 58% of them upon the implementation of the JIEPA.

Japan will eliminate more than 90% of its tariffs on Indonesian goods, 80% of which were abolished on July 1. These tariff reductions are expected to stimulate more trade between the two countries. One major benefit for Japan is a guaranteed flow of energy imports. Japan’s New National Energy Strategy, implemented in May 2006, aims at creating stronger relationships withresource-rich countries. Indonesia is just the kind of country that Japan needs to solidify relations with if it hopes to achieve the goals put forth by the New National Energy Strategy.

While Japan gained the energy security it desired, Indonesia stands to make several huge economic strides under the JIEPA. The agreement will allow Indonesian textile makers to export a wider variety of goods, including higher value items like clothing, to Japan. Indonesia’s auto industry will likewise reap significant benefits. Firms can now import parts and materials from Japan at lower costs. The Indonesian auto industry hopes this will make Indonesia more competitive as an automobile production center. The JIEPA will also increase Indonesia’s ability to send workers to Japan.

Indonesia will send 400 nurses and 600 caregivers over the next two years. Nurses will be given special three-year visas and caregivers will be given four-year visas. These medical workers will be educated in Japan in order to pass Japan’s national nursing and care workers exams. Those who pass the exam will be allowed to continue to work in the country. The agreement will also further develop Indonesia’s supporting industry. Japan will send experts in mold and die, a small piece of semiconducting material, to train Indonesian workers.

In addition, the Japan External Trade Organization (JETRO) will work with both the Indonesian and Japanese governments to develop Indonesia’s human resources in the auto parts industry. Japanese experts will travel to Indonesia to deliver lectures and give council to Indonesian workers. These improvements will create jobs and expand SMEs across Indonesia, thus attracting international firms to invest in Indonesian companies. On the surface, it appears that Indonesia and Japan both gained significant economic benefits from the implementation of the JIEPA, and it would be a toss-up to determine which country got the better deal.

Japan has secured the energy imports it desired and Indonesia has secured Japan’s commitment to capacity-building in crucial areas of the Indonesian economy. But besides what is outlined in the JIEPA, Japan stands to gain future benefits as Indonesia’s economy continues to blossom. Keeping strong ties with Indonesia not only guarantees Japan a consistent supply of natural resources, but may create potential for additional resources in the future. Japan has already developed specific areas of Indonesia to secure future benefits.

For example, Indonesia’s two major liquefied natural gas (LNG) facilities were built under supply contracts to Japan. Consequently, Indonesia has been Japan’s largest supplier of natural gas for over thirty years. To secure these imports of natural gas and numerous other benefits, it is in Japan’s best interest to continue to assist Indonesia’s economic and social development. As the fourth most populous country in the world, Indonesia has tremendous potential for future growth.

Keeping close economic ties with the country may prove to be a wise investment for Japan that will yield increasingly more benefit as Indonesia continues to develop. Thus, what is good for Indonesia is good for Japan. Any amount of resources that Japan invests in Indonesia is an investment in which both parties gain. Though there are few Muslims in Japan, today’s Japanese public has generally accepted them as members of Japanese society. For the most part, Japanese people have accepted their cultural differences as colorful aspects of the world and have understood that these cultures are actually not very different from their own.

Mothers such as Khan, a Japanese woman who married a Muslim, lived in Pakistan for several years, and has three children, are not very different from the other Japanese mothers. Khan is very fashionable, with her flowery pink and white hijab and long, dangly earrings; people who have met Khan enjoy her energetic company and embrace the life that she has chosen. It is this understanding, this openness, and this innate compassion that is essential in fighting for the rights of all people and the preservation of human dignity.