As China restructures its economic engine for growth, other emerging economies in Asia are faced
with a challenge to adapt and reorient their strategies in harmony with that of the “dragon’s head”, a minister says.
Speaking on the fringes of the World Economic Forum (WEF) in Tianjin, China, on Monday, Indonesian Trade Minister Mari Elka Pangestu said that in order to attain sustainable growth, emerging economies such as Indonesia had to adjust to the rebalancing of the global economy now being led by China’s economic expansion.
“China’s competitiveness is no longer based on low-cost labor, it has shifted into higher technology and services. This reality brings a challenge on how we determine our position,” Mari told The Jakarta Post by telephone.
At the welcoming plenary session of the annual WEF meeting, China’s Premier Wen Jiabao said the world’s fastest growing economy is in “good shape”, and heading for a gradual structural improvement.
The nation’s benchmark stock index rose the most in a week and the yuan advanced to the highest since the peg to the dollar was scrapped in July 2005 in the light of better-than-expected economic results for August. China’s growth will drive a global economic recovery, Wen said today, quoted by Bloomberg.
Mari said the “wind of change” in China had been directly felt in Indonesia as more investors were relocating their factories here.
Previously in April, three sports shoe brands had relocated their production base from China to Indonesia. These include Mizuno and Asics Tiger, both from Japan, and New Balance, from the US. Six footwear firms from Taiwan and South Korea have also relocated factories from Vietnam and China to Indonesia.
Carlos Ghosn, the man responsible for Nissan Motor Co.’s return to profit, visited Indonesia in June and announced the company’s plan to spend US$20 million to double its production output in Indonesia as economic growth spurs demand.
The shift of investment focus to Indonesia was not solely caused by rising wages in China, Mari said.
“Our labor force is skilled. Plus we have other positive advantages, we have the raw materials.”
The next step for Indonesia, Mari said, would be to improve its services industries, particularly information technology, telecommunications and design.
“China is also moving towards similar sectors, but maybe we can excel in creative industries such as design, animation and films, and also media content,” she said, suggesting avoiding a head to head competition with China.
Looking forward, Mari warned of the negative impact of a premature shift towards developing derivative products for Indonesian commodities.
“We mustn’t insist on products where there is no demand. Indeed we have to give incentives to processing industries, but first we must make them focus on improving the quality of commodities.
Better quality coffee beans will get a higher price,” she said.
