Worldwide Globalization and Its Impacts on Developing Countries: The Case of Indonesia

By Junarsin, Eddy | Journal of Global Business Issues, Summer 2009 | Go to article overview
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Worldwide Globalization and Its Impacts on Developing Countries: The Case of Indonesia


Junarsin, Eddy, Journal of Global Business Issues


ABSTRACT

The emerging globalization has raised the economic integration among countries. Some view it as a beneficial process, which is a key to future world economic development and abo inevitable and irreversible. Others regard it with hostility and fear, believing that it increases inequality among nations, threatens employment and living standards, and obstructs the social progress. Despite all of the controversy, globalization has clearly created many new opportunities and requires every nation to keep up the pace in order to stay competitive. It has abo allowed countries to develop partnerships and alliances throughout the world, which has become essential for success recently.

Strategy designed and executed by Indonesia is highly dependent upon the scenario prevailing. In the progressive world scenario in which there are no major disruptions, surprises, or shocks, the country should utilize progressive strategy. Meanwhile, when the chaotic world scenario prevails, Indonesia has to implement defensive strategy, striving for survival and sacrificing improvement temporarily. On the other hand, if Indonesia experiences great momentum scenario, it can harness attacking strategy as basic requirements, such as economic performance and social stability, have been well maintained and enhanced such that the country will be able to continue expanding globally, focus on future-oriented economic and technological advancement, and promote creativity and innovation.

Introduction

Globalization has been renowned as a major force nowadays influencing the pattern of worldwide organizational development, both at macro or nation level and at micro or company level. Accordingly, it is of interest to people to analyze and discuss how countries respond to changes brought by the globalization.

This paper purports to analyze Indonesia's efforts to promote nation's competitiveness to respond to globalization scenarios. Indonesia is chosen as a showcase representing developing countries since it has been involved in international arena, either politically, economically, or socio-culturally whilst also losing its competitiveness relative to other nations, especially in the periods following the Asian financial crisis. Discussion concerning this matter will be analyzed in the next section.

The study employs a framework of analysis depicted by the figure below.

This paper tries to analyze whether or not Indonesia can survive or thrive in the globalization process. Another question is what Indonesia has to do in order to enhance its competitiveness. The questions are to be answered by linking the context of globalization with design components such as technology, human resources, structure, performance measurement, and culture. The connection is then utilized to build scenario analysis of globalization, and discuss how Indonesia should deal with each scenario for establishing and extending its competitive advantage.

Globalization Spreading Across Nations

Historically, the idea of globalization is generally based on the neoclassical economic model that requires boundary less flows of goods and services among economic entities. The model encourages countries to reduce or even eliminate protectionism practices such as tariffs, quota, or dumping, and to specialize in products predicated on comparative advantages they possess.

Definition and Implications of Globalization

Globalization is a process of capital flows consisting of: (i) human capital, (2) financial capital, (3) resource capital, and (4) power capital. The term basically describes how people are more intertwined with each other across places in the four main aspects of life: political, economic, social, and technological aspects.

Political Aspect

In the political aspect, governments establish institutions and rules concerning issues such as international trade, environment, human rights, etc.

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