Economic Essay Draft

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The process of globalisation is best defined as a movement towards greater economic integration between countries through reduction in the barriers to free trade. The process of globalisation accelerated in the 1990a and 2000s due to the spread of new cost saving technology in transport and communications and the deregulation of financial markets. Indonesia is the largest economy of the South East Asia economic region, having the fourth largest and the 19th largest economy; it is an emerging economy that has increased international integration in recent decades. Although Indonesia has a large economy, it also has a very large population, estimated around 237million people in 2010. Having low standard of living with a national income of $3600 per person, this makes Indonesia rank 147th in the world for income level. This classifies it as a low-middle income economy by the World Bank. Indonesia’s low level of income means that it suffers from a relatively high incidence of poverty, around 30% of the population lives on less than $US1.25 per day. Indonesia suffers from low levels of economic development. According to the United Nations, Indonesia’s HDI of 0.734 is below 110 other economies. Income Inequality in Indonesia, as measured by its Gini index of 37.56, is similar to other economy in the region such as Malaysia and Vietnam. The distribution of income is more equal than in many countries, such as Thailand, the Philippines, or major economies such as China or the United States. This is part of the reason why Indonesia does better in international comparisons of economic development than it does in measures of income or economic growth. In previous decades, Indonesia was considered a developing economy, and later, as a newly industrialised economy. Indonesia is now considered as an emerging economy because of its strong growth performance and prospect, growing at an average rate of 5.1 per cent. Although not as fast as some neighbouring economies in East Asia, this growth rate puts Indonesia well ahead of most economies around the world. Another reason Indonesia is an emerging economy because of the transformation of its industry structure in recent decades. During the past decade, Indonesia has experienced an economic recovery, fuelled by household consumption and government expenditure. Despite continued economic growth, unemployment in Indonesia trended upwards for most of the past decade, from 6% to 11% in 2005; unemployment is forecast to fall back to 6.7%by 2011. Indonesia maintained strong growth during the Global Financial Crisis, recording growth of 4.5 per cent for 2009. Economist have pointed to Indonesia’s lower dependence on exports as a source of growth and greater reliance on the rapidly growing Chinese economy as reasons for its resilience during the global turndown compared with Indonesia’ greater vulnerability during the Asian financial crisis a decade earlier. Globalisation has played a significant role in Indonesia’s economic fortunes in recent decades. The process of opening up the Indonesian economy has occurred gradually since the mid-1980s. Reforming the economy has been necessary so that Indonesia can keep pace with the other economies in South East Asian region. As the oil boom of the 1970s subsided, Indonesia needed to find more sustainable foundation for long term economic growth, and exporting manufacturing goods was to be a key part of this. Since the mid- 1980s, Indonesia has lowered protectionist barriers to trade, which has increased competitive pressure and made businesses more export focused. Trade liberalisation has been a crucial component of Indonesia’s integration with South-East Asia and the global economy. Indonesia has shifted away from a policy of import substitution towards exports led to development around the mid-1980s. Prior to the 1980s, Indonesia was a highly protected economy. Indonesia’s oil boom in the 70s saw the imposition of strict trade barriers to protect...
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