The Breakout Nation: Indonesia as an Emerging Market

By Sharma, Ruchir | Harvard International Review, Winter 2013 | Go to article overview

The Breakout Nation: Indonesia as an Emerging Market


Sharma, Ruchir, Harvard International Review


You described the past decade as "freaky," as all countries grew. Can you place the progress of the BRIG countries into global perspective?

In the last decade, what we saw was that virtually every single emerging market did well. It was captured in the peak year, 2007, when only three countries recorded a negative GDP growth rate: Fiji, Zimbabwe, and Congo. That was really the peak of the emerging market boom of the past decade.

[ILLUSTRATION OMITTED]

What caused this exceptional decade was a combination of many factors. The 1990s was a very poor period for emerging markets so there was scope for catch-up. Many emerging markets experienced crises during the 1990s--East Asia, Russia, Mexico--which is why the growth rates of emerging markets in the 1990s were rather low, at only 3 percent or so.

The other reason was that from 2003 onward a liquidity rush started from the United States. We've spoken about how the liquidity led to a housing bubble in the United States and in Europe, but not enough analysis has been given to how the very low cost of capital and high liquidity also led to these exceptionally strong growth rates in emerging markets. The average growth rate of emerging markets from 2003 onwards jumped to more than 7 percent.

These were the exceptional circumstances, but what we are seeing now especially in the last couple of years is that the growth rates of many of these emerging markets are falling back. Brazil has not been able to grow faster than 3 percent. Russia is back to growing at 3 percent. India's growth rate has slipped back to about 6 percent from being at 8 percent. As liquidity becomes tighter in the global market place and people become more risk averse, we are seeing that growth rates of many emerging markets are falling back. And we're going back to the old pattern, which is that there is much greater distinction [between countries]. Just because you're an emerging market doesn't mean that you're destined to grow much faster than the developed world. My entire theme of the book is about differentiation; that you've got to treat emerging markets individually. This term is still too loosely applied.

You have argued that Indonesia approaches economic policy differently--that there is a rare caution in Indonesia, which distinguishes it from other emerging markets.

Based on my travels to Indonesia and elsewhere, Indonesia seems to have used the commodity windfall better compared to the likes of Brazil and Russia. And one big factor is that the investment of the share of GDP in Indonesia has been steadily rising over the last 10 to 15 years--standing now at about 32 percent of the economy. That to me is a fairly positive factor compared to Russia and Brazil, who have not utilized the commodity boom well, and the investment of the share of GDP remains very low at barely 20 percent or so.

Also, some of the banks in Indonesia still remember the '97-'98 crises, which keeps them from doing something that is too out of control. If you look at the credit growth in Brazil, over the last five years it has been rapid; this is causing problems in the banking sector with some of the auto loans going sour and some of the credit quality metrics deteriorating quite significantly. But in the case of Indonesia we've seen that banks have been a bit more cautious.

So do you think Indonesia should not be focusing on increasing commodity exports? Is it really domestic investment that is putting it at an advantage?

Yes that is my view. Indonesia should be looking to increase its exports because exports as a share of GDP is relatively low. Indonesia has to assume that the benefits over the past decade from high commodity prices are over. That's what Indonesia needs to be careful about.

The other breakout nations that you mentioned are South Korea, Poland, and the Philippines. What similarities do you see between these countries and Indonesia? …

The rest of this article is only available to active members of Questia

Sign up now for a free, 1-day trial and receive full access to:

  • Questia's entire collection
  • Automatic bibliography creation
  • More helpful research tools like notes, citations, and highlights
  • Ad-free environment

Already a member? Log in now.

Notes for this article

Add a new note
If you are trying to select text to create highlights or citations, remember that you must now click or tap on the first word, and then click or tap on the last word.
One moment ...
Default project is now your active project.
Project items

Items saved from this article

This article has been saved
Highlights (0)
Some of your highlights are legacy items.

Highlights saved before July 30, 2012 will not be displayed on their respective source pages.

You can easily re-create the highlights by opening the book page or article, selecting the text, and clicking “Highlight.”

Citations (0)
Some of your citations are legacy items.

Any citation created before July 30, 2012 will labeled as a “Cited page.” New citations will be saved as cited passages, pages or articles.

We also added the ability to view new citations from your projects or the book or article where you created them.

Notes (0)
Bookmarks (0)

You have no saved items from this article

Project items include:
  • Saved book/article
  • Highlights
  • Quotes/citations
  • Notes
  • Bookmarks
Notes
Cite this article

Cited article

Style
Citations are available only to our active members.
Sign up now to cite pages or passages in MLA, APA and Chicago citation styles.

(Einhorn, 1992, p. 25)

(Einhorn 25)

1

1. Lois J. Einhorn, Abraham Lincoln, the Orator: Penetrating the Lincoln Legend (Westport, CT: Greenwood Press, 1992), 25, http://www.questia.com/read/27419298.

Cited article

The Breakout Nation: Indonesia as an Emerging Market
Settings

Settings

Typeface
Text size Smaller Larger Reset View mode
Search within

Search within this article

Look up

Look up a word

  • Dictionary
  • Thesaurus
Please submit a word or phrase above.
Print this page

Print this page

Why can't I print more than one page at a time?

Full screen

matching results for page

Cited passage

Style
Citations are available only to our active members.
Sign up now to cite pages or passages in MLA, APA and Chicago citation styles.

"Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences." (Einhorn, 1992, p. 25).

"Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences." (Einhorn 25)

"Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences."1

1. Lois J. Einhorn, Abraham Lincoln, the Orator: Penetrating the Lincoln Legend (Westport, CT: Greenwood Press, 1992), 25, http://www.questia.com/read/27419298.

Cited passage

Welcome to the new Questia Reader

The Questia Reader has been updated to provide you with an even better online reading experience.  It is now 100% Responsive, which means you can read our books and articles on any sized device you wish.  All of your favorite tools like notes, highlights, and citations are still here, but the way you select text has been updated to be easier to use, especially on touchscreen devices.  Here's how:

1. Click or tap the first word you want to select.
2. Click or tap the last word you want to select.

OK, got it!

Thanks for trying Questia!

Please continue trying out our research tools, but please note, full functionality is available only to our active members.

Your work will be lost once you leave this Web page.

For full access in an ad-free environment, sign up now for a FREE, 1-day trial.

Already a member? Log in now.