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Indonesia: Rethinking Development, Speeding up Growth

June 28, 2011

JAKARTA, June 28, 2011 – Identifying future competitive industries and facilitating growth through targeted government support could make a huge difference to Indonesia’s long-term growth, says World Bank Chief Economist Justin Yifu Lin . Dr. Lin has just completed a two-day visit of Jakarta, where he shared his views on the Indonesia’s potential for structural transformation with several government officials and key stakeholders. It is forecasted that Indonesia will be a major growth pole by 2025 – being one of six emerging economies accounting for more than half of all global growth. However, before reaching that point, Indonesia would need to intensify its reform efforts and examine whether its targeted sectors match its comparative advantages.

“Indonesia is a country of many advantages, among other things: it has an abundance of resources, a large and relatively well-educated labor force, a large domestic market, a vibrant domestic business community, and it’s geographically close to some of the world’s most dynamic growth poles. Indonesia’s thriving automotive industry is a perfect example of how Indonesia has managed to converge these assets into a well-targeted sector ,” said Dr. Lin, who is also a Senior Vice President in the World Bank’s Development Economics unit. “Following your comparative advantage is the best way of expanding local industries, sustaining income growth and reducing poverty.”

While in Jakarta, Dr. Lin gave a public lecture on structural transformation as well as growth identification and facilitation . These strategies are designed to guide governments of poor and developing countries as they foster new industries in line with their comparative advantages.

The West took 300 years to innovate and industrialize. Japan took less than 100 years. Yet for East Asia, it took only 40 years to imitate and catch up. Countries like China and Indonesia took advantage of their large work force to power labor-intensive industries and accelerate growth,” said Lin. “Wages are now rising in these Asian Dragon countries. This becomes an opportunity for poorer countries to enter labor-intensive industries and catch up.”

This marks Dr. Lin’s first visit to Indonesia since joining the World Bank in June 2008. During his visit, Dr. Lin met with the Minister of Finance, Minister of Trade, the Head of the National Investment Coordination Agency (BKPM), members of the private sector, and the National Economics Committee (Komisi Ekonomi Nasional).

As chief economist, Dr. Lin plays a key role in shaping the economic research agenda of the institution. Building on a distinguished career as one of China’s leading economists, Dr. Lin is leading a research program that examines the industrialization of rapidly developing countries and the causes of lagging growth in poor regions. He is the World Bank’s first chief economist from a developing country.

Media Contacts
In Jakarta
Randy Salim
Tel : (62-21) 5299-3259
In Washington, DC
Mohamad Al-Arief
Tel : (1-202) 458-5964