Nama : Nilasari Cahyaningtias
Kelas : 1EA18
Npm : 15212326
High Cost Economy in Indonesia
Implementation of the ASEAN - China Free Trade Area
(ACFTA) can be regarded as an opportunity for the domestic industry to expand
into China and Southeast Asia markets. However, this opinion is still doubtful
due to the fact that the competitiveness of domestic industries Indonesia is
relatively lower when compared with China and ASEAN member countries another.
Based on the analysis of the Ministry of Industry, the competitiveness of
industrial products and manufacturing Indonesia to ASEAN countries only 15% who
have a strong competitive edge and nearly 60% of the products have weak
competitiveness. Another case against China, the competitiveness of Indonesian
products that are strong only 7%, remaining competitive are 29% and 55% weaker.
So, what exactly is the cause of the low competitiveness of Indonesia when compared to China. Mari Elka Pangestu, Minister of Trade, Republic of Indonesia, in an interview has said that competitiveness or competitiveness is determined by many factors, including external and internal factors. own external factors closely related to competitiveness and comparative advantages of other countries that became Indonesian competitors. For example, X products made in China that have very cheap prices and huge production scale is difficult to rivaled by Indonesia, making Indonesia the low competitiveness of the product X when compared with China. In addition to external factors, there are also internal factors that determine the competitiveness of the product, especially with regard to domestic factors, including human resources / employment, investment, production costs, and technology. Internal factors that do need improvement and repair via a comprehensive government policy.
Low competitiveness of Indonesian products in international trade, which are influenced by internal factors of the domestic economy can be attributed to the high cost or high cost economy that still exist in the national economy. There are several aspects that lead to high cost economy in Indonesia, among other labor problems, problems of credit interest rate / high borrowing costs, bureaucracy / politics is not the least costly, and infrastructure issues. Five aspects will be discussed further to analyze the causes of high cost economy in Indonesia, which impact on the weak competitiveness of domestic products compared with products made in China.
Problems of labor / labor is one of the causes of high cost economy in Indonesia. This also led to the competitiveness of Indonesian children's products made it difficult to compete with similar products made in China. Widjanarko Tjokroadosumarto, Toys Indonesian Employers Association chairman (APMI) revealed differences in the treatment of the workers there, which led to the high cost economy. Workers in China earn better facilities than workers in Indonesia. Despite only receiving a salary of $ 100, laborers in China generally do not need to rent a house because the local government worker who rented bungalow is available at a cheap price. Another case with workers in Indonesia are 30% of the salary used for the cost of the contract.
Although labor costs in Indonesia are relatively lower than other ASEAN countries (except Vietnam), the cost to lay off workers in Indonesia is very high especially during the dismissal of employees in large numbers. When the issue of the mass layoffs of workers in Indonesia usually do massive demonstrations to demand the severance provision. It is then also contribute to the cause of high cost economy.
So, what exactly is the cause of the low competitiveness of Indonesia when compared to China. Mari Elka Pangestu, Minister of Trade, Republic of Indonesia, in an interview has said that competitiveness or competitiveness is determined by many factors, including external and internal factors. own external factors closely related to competitiveness and comparative advantages of other countries that became Indonesian competitors. For example, X products made in China that have very cheap prices and huge production scale is difficult to rivaled by Indonesia, making Indonesia the low competitiveness of the product X when compared with China. In addition to external factors, there are also internal factors that determine the competitiveness of the product, especially with regard to domestic factors, including human resources / employment, investment, production costs, and technology. Internal factors that do need improvement and repair via a comprehensive government policy.
Low competitiveness of Indonesian products in international trade, which are influenced by internal factors of the domestic economy can be attributed to the high cost or high cost economy that still exist in the national economy. There are several aspects that lead to high cost economy in Indonesia, among other labor problems, problems of credit interest rate / high borrowing costs, bureaucracy / politics is not the least costly, and infrastructure issues. Five aspects will be discussed further to analyze the causes of high cost economy in Indonesia, which impact on the weak competitiveness of domestic products compared with products made in China.
Problems of labor / labor is one of the causes of high cost economy in Indonesia. This also led to the competitiveness of Indonesian children's products made it difficult to compete with similar products made in China. Widjanarko Tjokroadosumarto, Toys Indonesian Employers Association chairman (APMI) revealed differences in the treatment of the workers there, which led to the high cost economy. Workers in China earn better facilities than workers in Indonesia. Despite only receiving a salary of $ 100, laborers in China generally do not need to rent a house because the local government worker who rented bungalow is available at a cheap price. Another case with workers in Indonesia are 30% of the salary used for the cost of the contract.
Although labor costs in Indonesia are relatively lower than other ASEAN countries (except Vietnam), the cost to lay off workers in Indonesia is very high especially during the dismissal of employees in large numbers. When the issue of the mass layoffs of workers in Indonesia usually do massive demonstrations to demand the severance provision. It is then also contribute to the cause of high cost economy.
In addition, the regional minimum wage in urban areas
are higher to make the company a lot of building factories and hiring workers
in rural areas are lower minimum wage. This would then have implications for
the rising cost of transportation and supporting infrastructure expenditure
(both of these aspects will be discussed in the next section).
Bureaucratic problems
Bureaucracy and political factors believed to be one of the main causes of high cost economy in Indonesia. Bureaucratic costs, both official and unofficial in some areas can reach 20% of the cost of production. The high cost of the bureaucracy will ultimately lead to the price of output produced Indonesia became more expensive when compared with products made in China. Furthermore, the cost of high cost economy due to the bureaucratic costs will also make the cost of Indonesia's exports are higher than its competitors, including China.
Bureaucratic problems
Bureaucracy and political factors believed to be one of the main causes of high cost economy in Indonesia. Bureaucratic costs, both official and unofficial in some areas can reach 20% of the cost of production. The high cost of the bureaucracy will ultimately lead to the price of output produced Indonesia became more expensive when compared with products made in China. Furthermore, the cost of high cost economy due to the bureaucratic costs will also make the cost of Indonesia's exports are higher than its competitors, including China.
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