eforms cannot simply be “sent”; they have to be “delivered”. That is what President Joko “Jokowi” Widodo envisions as he embarks on his second term. He will need this determination to achieve one of his biggest priorities this time around: structural reform.
“We have to transform our dependence on natural resources into competitive and modern manufacturing and service capabilities,” he explained. This is something that the government has championed for years, but using the President’s own language, Indonesia’s “structural reform” has only been sent. It has yet to be delivered.
Today, 60 percent of our exports of merchandise still come from agriculture, minerals and metals. This reality is more jarring when we look at our neighbors. Vietnam’s biggest exports are TV and radio transmitters, and electronic microcircuits are the chief exports of the Philippines, Malaysia and Singapore. Indonesia’s are palm oil and coal, which make up more than 20 percent of our exported merchandise.
The main problem with relying on raw commodities is that their prices are inherently volatile. The fleeting ecstasies of commodity booms are followed by excruciating crashes. At the peak of the last commodity boom in 2011, our economy grew 6.5 percent. When the boom went bust in 2014, our growth fell below 5 percent.
What makes this predicament all the more frustrating is that everyone is aware, including policymakers, that no country has managed to sustain long-term growth by relying on raw commodities alone. Yet like an inveterate junkie, our country cannot kick its natural-resource addiction.
The government could [...] establish industrial zones [...] outside of Java, where wages are lower because of lower living costs.
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