Comment on “Indonesian Growth Dynamics”

• DOI: http://doi.org/10.1111/j.1748-3131.2011.01186.x
• Published date: 01 June 2011
• Author: Chalongphob SUSSANGKARN
• Date: 01 June 2011

Comment on “Indonesian Growth Dynamics”

Chalongphob SUSSANGKARN†

Thailand Development Research Institute

JEL codes G01, O53

Basri and Hill (2011) provide an interesting account of the Indonesian growth experi-

ences, particularly the experiences through the 1997–1998 crisis and the recent global

financial crisis. The paper also discusses some important changes that resulted from the

1997–1998 crisis, including the changes in the political regime and the economic policy

environment. Lessons and future challenges are highlighted in a number of areas. I found

the paper very informative, but would like to probea little more about Indonesia’s growth

drivers compared to some of the neighboring countries.

The good Indonesian economic performance through the recent crisis indicated a

greater balance in the Indonesian economic growth engine compared to many other

neighboring countries. Indonesia has managed to maintain a good pace of growth

through the crisis. Gross domestic product (GDP) grew at a respectable 4.5% in 2009

compared to -1.7% for Malaysia, 1.1% for the Philippines, -1.3% for Singapore, and

-2.2% for Thailand. All of these Association of Southeast Asian Nations (ASEAN)-5

economies were not much exposed to subprime toxic assets, probably because of greater

banking risk aversion learned from the 1997–1998 crisis, as indicated in the paper.Indo-

nesia relied less on the export engine compared to the other countries, and her resource-

intensive exports also benefited from high prices. Therefore, the export meltdown

resulting from the global financial crisis had less impact on Indonesia’s macroeconomy

than in the other countries.aepr_1186110..111

It is true that Indonesia’s share of export of goods and services to GDP is much less

than the other ASEAN+5. Real exchangerate movements (figure 4 in Basri and Hill, 2011)

were indicated as an important reason why the export share did not increase from the

pre-1997 level as much as in the other economies. I am not so convinced of this. Figure4

started from 2000, but what would be the picture if it had started from, say, 1996? The

rupiah certainly depreciated much more than any other currency after the 1997–1998

crisis, although Indonesian inflation was also much higher. A rough comparison of the

real exchange rate between the baht and the rupiah from 1996 to 2008 does not seem to

show any strong appreciation trend for the rupiah, although that from 2000 to2008 does.

Another reason highlighted in the paper is likely to be much more important, and it

is that Indonesia has been slower than the other economies in moving away from labor-

intensive manufactured exports and joining the supply chain of more technologically

advanced products.At the same time, the labor-intensive exports face intense competition

from other countries, particularly China.

†Correspondence: Chalongphob Sussangkarn, Thailand Development Research Institute, 565 Soi

Ramkhamhaeng 39, WangthonglangDistr ict, Bangkok 10310, Thailand. Email: chalongp@tdri.or.th

doi: 10.1111/j.1748-3131.2011.01186.x Asian Economic Policy Review (2011) 6, 110–111

© 2011 The Author

Asian Economic Policy Review © 2011 Japan Center for Economic Research

110