I

ndonesia should focus on improving its infrastructure if it is to become a middle-income country, according to a leading economist.

In a lecture at the Center for Strategic and International Studies (CSIS) this week, Wing Thye Woo, professor of economics at the University of California, listed the top priorities for Indonesia to accelerate economic growth and become a leader in the region.

'€œInfrastructure overcomes the obstacles to trade and trade is the engine of growth,'€ Woo said.

'€œIn this turbulent global economy ['€¦] it is more important than ever for Indonesia to be able to generate internal '€˜push'€™ forces to expand its economy. In other words, domestic reforms are exceedingly important.'€

Woo said two things in particular would generate these '€˜push'€™ factors: '€œA focus on infrastructure investment'€ and '€œthe rejuvenation of Indonesia as a maritime power'€.

He also advocated for deregulation to allow more foreign investment. '€œIf the private sector is not mobilized, the state will crash,'€ he said.

In light of China'€™s slowing economy, Woo said that Indonesia should no longer rely on exporting resources for economic growth. On Tuesday Beijing announced its 2014 economic growth was 7.4 percent, down on previous forecasts. '€œWe have got a slower demand for Indonesian resources in the near future,'€ he said.

While encouraging infrastructure development, Woo highlighted the importance of ensuring that infrastructure was targeted and beneficial, saying Indonesia should learn from countries that have failed.

'€œMany countries built things that did not increase production. Worse, sometimes they built infrastructure that produced benefits that are no more than the cost of building that infrastructure. So you'€™re actually worse off and a lot of infrastructure spending was an excuse to give money to your political friends,'€ he said, warning that '€œinfrastructure spending and corruption moves together'€.

Woo warned against focusing too heavily on any one aspect of infrastructure development, such as on roads and ports, preferring instead a multi-pronged approach that included a focus on technology and education, '€œso you have balanced investments across the board'€.

'€œProgress comes about because of good new ideas and good ideas are what makes the world go forward,'€ he said.

In addition, Woo said maintaining peace in the South China Sea was crucial to ensuring stability in the region while promoting Indonesia'€™s own economic growth. '€œIndonesia can play a role in stopping the South China Sea dispute from escalating,'€ he said. Increased tensions in the region would force Indonesia to pick sides, he suggested.

The looming ASEAN Economic Community (AEC), scheduled to launch on Dec. 31, posed both an opportunity and a threat to the Indonesian economy, according to Woo.

'€œThe country that will have the biggest adjustment in the ASEAN Economic Community would be, in my opinion, the Indonesian economy,'€ Woo said.

'€œIf there is one automobile market for all of Southeast Asia, the Thai automobile industry will kill the Malaysian automobile industry and most likely it would do terrible things to the automobile industry here,'€ he said.

'€œIf there were to be one economic region, so that if we were able to move production and ownership of firms freely across the region then I think ['€¦] Indonesia could be negatively impacted.'€