Likening Indonesia’s economy to the ferocious Komodo dragon, Vice President Boediono says the government needs more help in taming the beast.
“It is meant to characterize an economy that is resilient, buoyant and surprisingly agile,” he said in his keynote speech at the Wharton Alumni Forum 2012 on Friday. “But yes, the Komodo also bites.”
It was The Economist newspaper that first used the Komodo moniker in describing Indonesia’s economy, in an article on Feb. 12.
Boediono was the head of the central bank before being picked by President Susilo Bambang Yudhoyono to be his vice president in 2009.
Indonesia’s economy has been growing by an average of more than 5.5 percent over the past five years, due in part to robust domestic consumption. The economy last year expanded by 6.5 percent — the fastest rate since 1996 — to $813 billion.
Boediono said that Indonesia has learned its lessons and moved on from the 1997-98 Asian financial crisis, the worst crisis to hit the country. At the time, Indonesia’s entire banking system collapsed, forcing the government to spend more than Rp 450 trillion ($48 billion) to bail out lenders.
Boediono said that Indonesia, as a young democracy in the process of massive transition from a centralized, authoritarian regime to a vibrant, decentralized democracy, has tremendous investment potential.
The vice president expects the economy to grow by more than 6 percent this year, supported by an increase in household consumption. Private consumption accounts for around two-thirds of Indonesia’s economic activity.
Despite the cause for optimism, he said, there are many potential obstacles that need to be negotiated, and input from a variety of sources will be necessary. Lingering problems in infrastructure remain the nation’s biggest barrier to achieving a more robust economy, he said.
“In fact, this is the most immediate binding constraint to our growth,” Boediono said.
Indonesia will need 25,000 megawatts of additional power by 2020, and more than 10,000 kilometers of additional roads as part of the country’s efforts to boost infrastructure.
“That extraordinary pool of knowledge and expertise should be shared,” he said, inviting participants from the Wharton School of the University of Pennsylvania to take a more active role and work directly with the Indonesian government.
“We would like to extend our invitation to Wharton academics, students and alumni to take a more active role and work directly with our government to advise, coach, train, and share knowledge with our public sector so that we can make better decisions for Indonesia’s future,” said Boediono, the holder of a doctorate from Wharton.
Malaysian central bank governor Zeti Akhtar Aziz, who was speaking at the same forum, said that Asian nations, including Indonesia and Malaysia, are better prepared to face global economic shocks after they strengthened domestic demand and their financial systems following the 1997-98 regional crisis.
Haryanto Adikoesoemo, chief executive and president of AKR Corpindo, an oil and mining distributor and service company, said the Indonesian government should build more infrastructure projects to create jobs and remove traffic congestion in the country’s main airports and seaports.
AKR Corpindo operates 18 ports in Indonesia and aims to run 25 ports by 2015.
“By leveraging on infrastructure, we increase our competitiveness,” Haryanto added.