Impact Of Globalization On The Economy

According to AAFC (Agriculture and Agri-Food Canada, 2010) due to its extensive natural resources and geographical location, in the way of several of the world’s most important trading routes, Indonesia represents the Southeast Asia’s largest economy. On a global perspective, Indonesia is the fourth most populated country and has the largest Muslim population, besides being the world’s largest archipelago, with around 17,000 islands. The country’s GDP (Gross Domestic Product) is also showing considerable and stable growth throughout the years and unemployment rates dropped considerably (AAFC, 2011).

Indonesia is the sixteenth largest economy, the largest economy in the South-east Asian economic region with the world's fourth largest population (263 million in 2017). It is an emerging economy that has increased its international integration, trade liberalisation and diverted from policies of import substitution towards export-led development. Indonesia is a member of the Group of 20 (G20) major economies and has been an active founding member of the World Trade Organisation (WTO). The impact of globalisation has benefited Indonesia as quality of life indicators and economic developments have improved but it also presents the challenge of improving regulations, building more competitive industries, increasing investment into education and infrastructure to remain competitive. Consequently, Indonesia has introduced numerous strategies to promote economic growth and development.

“In 1998 20% of the Indonesian population were below the poverty line. In 1999, 28% of the population was below the poverty line. Then in 2000, 22% of the population was below the poverty line” (Rukmana).

Indonesia has been independent for just over half a century. In this short time the country has had to adjust to the demands of the modern world.

Indonesia can best be described as a powerful emerging market. Indonesia has managed to relinquish its former status as a third world country and make a name for itself in the world market. Currently, it is the third largest populated country in Asia with 254.5 million, right behind China and India respectively.5 It has the sixteenth largest economy as of 2014 based off

Indonesia is the largest economy in South-East Asia; it has progressed into a decentralized electoral democracy and has managed to reduce its overall poverty from 17 percent in 2004 to 11 percent in 2014. However, despite their steady economy and major improvements, nearly 40 percent of Indonesia lives just above the poverty line. Additionally, Indonesian public services and health standards fall behind other middle-income countries; these facts combined with their high rates of maternal mortality, child malnutrition, and insufficient access to education place Indonesia in the developing or Third World realm. Indonesia’s history, geographic position, abundance of natural resources, wars and conquest, as well as trade has fundamentally shaped the economic and political structure. Furthermore, leadership influence, intervening forces, and its colonial masters have also played a large role in constructing the systems of this developing country.

Too much focus on commodities will not help to further grow their economy as commodity prices are generally lower than manufactured goods, and are volatile, very much determined by world market forces. When prices drop, it will affect Indonesia’s export income greatly. Therefore, a shift in focus will help to make the economy more stable.

Over the past few years, middle income segment in Indonesia is growing rapidly and has a direct impact to Indonesian economy. According to Euromonitor middle income segment is around 52.4% of the total population in 2010 which is predicted to get wider considering the salary increase every year. One industry that impacted directly by the increase of middle income segment is fashion retail segment, in specific department store. The fashion retail in Indonesia is dominated by department stores, which is around 98% by sales.

Ever since Indonesia has opened its economy to global forces in the mid-1980’s, the country has experienced the growth of trade and investment and the increased participation of transnational corporations in the economy. Reforming the economy has been necessary so that Indonesia can keep pace with other economies in the South-East Asian region and avoid relying too heavily on commodity exports, whose value on global markets tends to be volatile.

The macroeconomic conditions of Indonesia are moderately challenging. The World Bank (2012) categories Indonesia as a lower middle income country. The CIA World Factbook (2012) notes that the country "still struggles with poverty and unemployment, inadequate infrastructure, corruption, a complex regulatory environment and unequal resource distribution among regions."

Globalisation is referred to as “The worldwide movement toward economic, financial, trade, and communications integration.” (Businessdictionary.com) Globalisation enables vast growth within international trade, foreign direct investment (FDI) and standard of living (measured by Human development Index). Globalisation in relation to Indonesia has greatly expanded the country’s international relationships, improved standard of living for the nation’s population and improved economic growth through assistance from strategies implemented to aid development. These strategies include Indonesia joining the World Trade Organisation (WTO) and introducing stimulating macroeconomic policies.

For the current statistical background about Indonesia’s economy, the population have been steadily increasing and has reached 260 million people in 2016. The population is equivalent to 3.51% of the total world population and ranks 4th in the list of countries by population. However, despite being the 4th most populous country in the world, Indonesia still has not reached the peak of their human potential. The GDP per capita in 2015 was $3,346.49 in US currency. The GDP per capita indicates the standard of living and is measured frequently, widely, and consistently. Since most of the buildings and facilities are placed in Java, it is low on proximities and have bad services because of low work- ethics, the GDP per capita is low. Also, the literacy rate of the adult population knowing how to read and write is 95%.

A public hearing in 1997; talked about the worker’s condition in Indonesia (Herlina no date, p. Online) showed some findings that these conditions was resulted from lack of regulations and controls. Less

The population of Indonesia since the year 2014 is mostly Urban (53%) which just tops the Rural (47%) population. The rate of urbanization has a 2.69% of annual rate of change between the years 2010-2015. Since 2014 this are the major urban areas; Jakarta (10.176 million) which is the capital of Indonesia, Surabaya (2.834 million), Bandung (2.513 million), Medan (2.182 million), Semarang (1.614 million), and Palembang (1.454 million). The information above is important but in this paper the main objective that I will be discussing is the political system, economic data, factors that keep are present that have the population growing and or regressing and the relationship between the United states and Indonesia.

In 2004, Indonesia overall score dramatically decreased. It was mainly due to a decrease of its monetary and investment freedom indicators (see Exhibit 4 and 5 relatively). Whereas its rapidly increase from 2005, it was mainly due to an increase of its trade (see Exhibit 6) and again monetary freedom indicators.