CAN INDONESIA COMPETE? RECOVERY FROM THE CRISIS

Abstract

In recent years, competitiveness has become more than a fashionable concept. Despitecritiques of the application of this concept, some scholars have started to apply thisconcept on building and assessing the competitiveness of nations.This paper presents the application of competitiveness concept, which compares thecompetitiveness of two Asian developing countries, Indonesia and Thailand due tothose countries were hit by the financial crisis at the same time. The measurement ofcompetitiveness uses two methods: (1) the measurement of the range of real exchangerate and export performance, and (2) the growth of GDP per capita.Based on the real exchange rate analysis, Indonesia’s competitiveness is adequatealthough most measures of the real exchange rate remain below the early 1990s level.Most recent in one or two years, Indonesia shows a sound improvement incompetitiveness. The export performance analysis on the other hand suggests thatIndonesia needs more concern to increase the competitiveness.The significant growth of GDP over the last two years indicates that Indonesiacompetitiveness has started increasing. To increase the growth level and thecompetitiveness level, the reform programs such as structural reforms, financial reform,tax reforms, and law reforms must support macroeconomic and microeconomicconditions.