Indonesia Globalisation

Indonesia is the largest economy of the South East Asian region. Previously considered a developing economy, Indonesia is now categorised an emerging economy due to its strong growth performance, prospects and shift from an agricultural based economy to a newly industrialised one. Despite it’s increasing economic growth rate of 6.2% in 2012, Indonesia still suffers from a relatively low level of economic development, as indicated by the HDI of 0.629 which is below 120 other economies. Mostly, this is a reflection of Indonesia’s low standard of living, as measured by its income per capita which remains approximately 3500 USD as of 2012.Through a number of new government incentives such as the liberalisation of trade and financial deregulation, the Indonesian economy is attempting to become more integrated with the global economy.

TRADE FLOWS

To a large extent, Indonesian trade regimes have undergone significant liberalization since the 1980s, and this was further deepened in the wake of the 1997/98 economic crisis. The government veered away from a policy of import substitution and replaced it with export led developments. Tariffs began to reduce significantly and the government also relaxed its network of import licencing restrictions. Additionally, annual deregulation and liberalisation packages aimed to reduce the barriers to foreign trade and investment. After the Asian financial crisis of the late 1990s, Indonesia continued to pursue trade liberalisation under the guidance of the IMF Structural Adjustment program where tariff and non-tariff barriers were curtailed and restrictions on foreign investment were eased. In essence, trade liberalisation and globalisation has improved Indonesia’s access to overseas export markets and has led to stronger economic growth.

The Indonesian economy has become increasingly integrated with the global economy though their participation in various global, regional and bilateral trade agreements in recent years. On a