At the start of 2016, the Asean Economic Community (AEC) agreement will be in force. Responding to the issues raised by the agreement, the Executive Dean of BINUS BUSINESS SCHOOL, Firdaus Alamsjah, Ir., MSIE, Ph.D. (also known as Feri), explained what Indonesia needs to resolve.
What are Indonesia’s chances in facing the upcoming AEC??
The population of ASEAN is approximately 600 million people in comparison with one of the largest countries, the United States (US) which has a population of approximately 300 million. For the US to gain a gross domestic product of just 1% may prove difficult. On the other hand, ASEAN’s gross domestic product is capable of achieving 5%. Myanmar has 4.8%, The Philippines 6.8%, Indonesia 5%. This happens because many states in ASEAN are still developing states, which have many needs.
This region is nicknamed ‘the United States of ASEAN’. Indonesia is a member of G-20 (Group of 20) meaning that Indonesia is one of the twenty states which possess the highest domestic product in the world. Currently Indonesia is ranked 17th.
So, it is no surprise that Indonesia is the center of ASEAN as it is the most democratic state in ASEAN. Indonesia is very unique, and possesses many economic attractions; it is just a matter of managing them. Now, the new government is on a good track on management. Seeing such conditions many foreign parties have the courage to invest. Then Indonesia has large amounts of foreign direct investment.
What are Indonesia’s problems in facing AEC 2015?
Feri: Infrastructure is a concern for Indonesia’s readiness in facing the AEC. Our infrastructure may be the worst in ASEAN. Even though we are a large state, our logistics cost is still 24% from our gross domestic product. Logistics is an important matter in a free market.
If we want to send something from Cikarang to Tanjung Priok, for instance, the distance is 5.5 kilometers costing $450 per container, while Malaysia for the same distance will only charge $360, so it is 20% cheaper. Supposing that the item is sent by train instead of the toll road, the cost would decrease. The train has a low operational cost, however it is expensive to make. Like the United States, Malaysia uses trains.
So our economical challenge is regarding the transportation and infrastructure. Data on the logistics rate of ASEAN states indicates that Indonesia is ranked 53rd, while Singapore is 5th. The top 5 for the ASEAN region are Singapore, Malaysia, Thailand, The Philippines, and Vietnam.
As stated by the World Economic Forum, our worst infrastructures are ports, roads, and electricity. These should be fixed as soon as possible. That is where our task lies.
However, I should emphasize once more, infrastructure is only one of the various challenges that must be solved. There are other matters which should be promptly solved.
How do we solve these matters?
Feri: Infrastructure is only one of the challenges that must be solved. Many matters need to be fixed in facing the upcoming free market. The key to solving these matters are the people. Are the people of Indonesia prepared for the upcoming competition?
Tougher competition demands the best human resources. One of the institutions that can mold excellent humans is through the educational institution.
It is the obligation of educational institutions to produce competitive people. Not only excellent, these people must possess a global mindset for them to always be self-assured in dealing with foreigners which will be present within the ASEAN community. Access to education in this regard is an important concern. In order to produce competitive people, it is necessary that opportunities are open for them to study in the best educational institutions. The number of people holding a degree in Indonesia is still low in comparison with other states.
Unfortunately, the higher the level of education, the amount of people who enjoy education decreases. This leads to the scarcity of highly-educated professionals working in existing companies.
Now the government requires 12 years of education, so consequently the quality of our human resources should increase. If the quality of the human resources increases, then the per capita income will improve and everyone will feel that they are of better quality. With better salaries the state will improve, and the competitiveness of Indonesia will also improve.
Due to this, educational establishments must accommodate the need to face competition in the future. A studying method which is thorough is an absolute must, especially for those of the higher educational levels.
So, are you optimistic with Indonesia in the upcoming AEC?
We must be optimistic! I am sure Indonesia is capable in the AEC. In my opinion, ASEAN is a great opportunity for Indonesia. Do not forget, there are many challenges ahead, mainly the human resources which must be improved for the HR index to increase.
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