1 east asian economy: supplements- each south east asian economies g1 * some parts of this note are...

1

East Asian Economy: Supplements-Each South East Asian Economies G1

* Some parts of this note are borrowed from the references for teaching purpose only.

1

East Asian Economy <Lecture Note 4S1-Singapore Malaysia Thailand Indonesia Philippines> 2013.10.17

Semester: Fall 2013 Time: Thursday 2:00-5:00 pm Professor: Yoo Soo Hong Classroom: 423 Mobile: 010-4001-8060 E-mail: [email protected] Home P.: http://yoosoohong.weebly.com

1

2

Singapore

3

History of Singapore’s Economic Development

The 1960s: A time of turbulence and economic uncertainty

Poor infrastructure, unemployment, labor unrest..such were odds against Singapore in 1960s.

The 1970s: The move into skills-intensive industries

Economic Development Board of Singapore positioned as a quick operations start-up

location where factories were built in advance of demand and a highly-skilled workforce was

readily available.

The 1980s: The era of capital-intensive and high-technology industries

Singapore manages to attract the first wafer fabrication planet in he South East Asia

region. The move into R&D, engineering design, and computer software services marked

what was known as the Second “Industrial Revolution” for Singapore.

The 1990s: Services identified as a second pillar of the economy

As manufacturing was further strengthened, the service sector was identified as a second

pillar of the Singaporean economy.

The 2000s: A focus on innovation, knowledge and R&D

Innovation, R&D and Intellectual Property became Key economy drivers, requiring new

commercial and legal framework.

4

Major Economic Indicator-Singapore

2007 2008 2009 2010e 2011f

GDP (100 million dollar) 1,773 1,894 1,833 2,227 2,666

GDP per capita (dollar) 38,646 39,136 36,777 43,864 51,240

Economic growth (%) 8.8 1.5 -1.1 14.5 5.5

Consumer price inflation (%) 2.1 6.6 0.6 2.8 4.6

Exchange rate (S/dollar) 1.51 1.41 1.45 1.36 1.25

Current account balance (million dollar)

47084 36,011 32,628 46,271 46,671

Export (million dollar)302,822 342,776

273,411 358,373 431,668

Import (million dollar)256,859 316,161

243,180 310,391 381,122

Foreign reserve (million dollar)162,517 173,649

186,005 223,890 ..

Debt balance/GDP (%) 14.4 13.5 11.1 9.8 8.8Source: Korea Eximbank Overseas Economic Research Institute. 2010. 2010 World Country Review

5

Development Strategies Expanding external ties - embracing globalization through the multilateral trading

framework of the WTO, regional co-operation as well as bilateral Free Trade Agreements.

Maintaining competitiveness and flexibility - keeping the burden of taxes as low as

possible, reviewing the labor market and wage system to make them more flexible, and

pricing factors of production competitively.

Promoting entrepreneurship and domestic companies - encouraging people to be

innovative and improving the ability of firms to develop new ideas and businesses, tap

new export markets and broaden the economic base.

Growing manufacturing and services - upgrading these sectors by improving cost

competitiveness, equipping the labor force with relevant skills, and developing new

capabilities and industries.

Developing human capital - investing in education, helping workers train and upgrade, and

welcoming global talent to augment the indigenous talent pool.

6

Singapore’s GDP Growth

7

Singapore's Ranking in Doing Business (Out of 183 economies)

-Singapore is ranked first for having the most open economy for international trade and investment -Ranked as the world's easiest place to do business -Ranked the most competitive country in the world

Source: The International Bank for Reconstruction and Development/The World Bank. 2010. “Doing Business 2010, Singapore”

8

Skilled Employment

-Ranked 7th in the world and 2nd in Asia for having the most motivated workforce -Among the top 5 in Asia for the best skilled labor -Labor regulations are the most business conducive in Asia

Source: Economic Development Board, Singapore

9

Trade and Singapore’s Economy

-Singapore’s trade in goods and services was more than four times of its GDP in 2007.

-In nominal terms, Singapore trade in goods and services reached US$698.6 billion in 2007.

-Merchandise trade comprised about three-quarters of Singapore’s trade (78.3 per cent) in 2007. In nominal terms, domestic exports stood at US$155.9 bil-lion in 2007 while Re-exports was US$162.0 billion in the same period.

-Malaysia, China, the United States, Indonesia and Japan are Singapore’s top five trading partners, accounting for 48 per cent of total merchandise trade in 2007

10

Composition of Singapore’s Merchandise Exports

11

Growth of Singapore’s Merchandise Trade and GDP

1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008

-15.0%

-10.0%

-5.0%

0.0%

5.0%

10.0%

15.0%

20.0%

25.0%

30.0% Trade GDP

Gro

wth

Ra

te (

%)

Source: Singapore’s Department of statistics and IE Singapore.

Note: Data in Current Market Prices.

12

Growth of Singapore’s Merchandise Trade with Asian Countries, 1980-2007

-Singapore’s trade moved in tandem with its trade with Asia-63% of Singapore’s trade was with emerging Asian countries. -Main Asian trading partners:

Malaysia (Top trading partner with a 13% of Singapore’s trade in 2007) Indonesia (4th ranked trading partner with a 7.8% share of Singapore’s trade in 2007).

Source: IE Singapore, 2009

13

Singapore’s Exports to China as per cent of Singapore’s Total Exports, 1985-2007

-Singapore’s trade with China rose from US$2.59 billion in 1985 to US$60.8 billion in 2007. -Singapore’s exports to China also rose impressively by an average annual rate of 24.4 per cent between 1986 and 2007; with China’s share of Singapore’s exports increasing from 1.5 per cent in 1985 to 9.5 per cent in 2007.-About 40% of Singapore's Exports were destined for China.

Source: IE Singapore, 2009

14

References

Asian Development Bank. 2010. “Asian Development Outlook 2010”.

Economic Development Board, Singapore. 2010. “EDP Annual Report”.

International Enterprise Singapore. “Globalization Effect on Singapore's Trade”.

The International Bank for Reconstruction and Development/The World Bank. 2010. “Doing Business 2010, Singapore”.

Malaysia

15

- Population : 28.3067 million (2009)

- Age structure (2009):

- Total fertility rate : 2.95 child born/ women (2009)

- Life expectancy (2009):

- GDP 2009 : -3%

- GDP per capita 2009 : USD 5,406

- Major Industry : Manufacturing (55%)

- Major trading partner (2008) :

0 – 14 15 – 64 65 above

31.8% 63.6% 4.5%

Male Female

70.56 76.21

Export Singapore (14.7%) USA (12.4%) EU (11.3%) Japan (10.8%)

Import China (12.8%) Japan (12.5%) EU (11.8%) Singapore (11.0%)

Basic Information of Malaysia

16

Nominal and Real Growth Rate

1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008-10.0%

-5.0%

0.0%

5.0%

10.0%

15.0%

20.0%

Nominal GDP Real GDP

Source : Central Bank of Malaysia

17

1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 20080

50,000

100,000

150,000

200,000

250,000

Nominal GDP Real GDP

Year

Million U

SD


Nominal and Real GDP

18

Major Economic Indicator-Malaysia

2007 2008 2009 2010e 2011f



Economic growth (%) 6.2 4.6 -1.7 7.2 5.1


Exchange rate (M/dollar) 3.44 3.33 3.52 3.22 2.99


29,770 38,914 31,801 26,108 27,217

Export (million dollar) 176,220 199,733 157,655 197,010 227,701

Import (million dollar) 138,493 148,472 117,402 156,572 186,124

Foreign reserve (million dollar) 101,019 91,149 95,432

Debt balance/GDP (%) 33.5 32.8 39.7 36.2 30.2

Source: Korea Eximbank Overseas Economic Research Institute. 2010. 2010 World Country Review

19

2009Global

Recession

1997-98Asian Cri-

sis

Four Phases of Economic Growth

Commodity-driven and import substitu-tion

Rural development and nascent industrialization

Rapid industrialization and global integration

Towards higher knowledge-based economy…

- In the last 5 decades, Malaysia has witnessed major structural transformation of the economy. 1957-70 1971- 85 1986-99

1960 1970 1980 1990 20002009

2000 onwards

•A private-sector driven, commodity-based economy

•Pursued an import substitution strategy

•Government empha-sised on rural develop-ment and initiated effort on industrialisation

•Malaysia entered first recession in 1986 - col-lapse in commodity prices, twin deficit posi-tion

1985 Re-cession

•Policy thrust to de-velop Malaysia into a knowledge-based economy

•Growth was driven by domestic de-mand

•Post-crisis, Government pursued rapid industrial-isation, export promotion and introduced eco-nomic liberalisation

•Malaysia entered sec-ond recession in 1998 – due to speculative at-tacks on Asian curren-cies

20

Economic Development

- The standard of living has improved immensely for the average person since 1957. From close to zero, access to piped water, electricity and TV are all 100%. The Malay poverty level is < 17%.

- The New Economic Plan (NEP) of 1971 was a 20 year plan to eliminate

prosperity as a function of race. It sought rapid growth in the Malay sector without weakening Chinese enterprise.

- The NEP also sought to increase the Malay share of capital ownership to 30%, reduce foreign share to 30% from 63% and allow a 40% Chinese share.

- Malaysia’s economy is a market oriented, export economy with state owner-ship of heavy industry, only. Growth rate of GNP has been about 8% in the 1980s and 90s.

- Factors include global market liberalization, competition for FDI, especially from China and Vietnam and difficulties integrating into global supply chains.

21

- Per capita income of US$6,800 (2009) clearly significant achievement but seemingly caught in “middle income” trap

- Major preoccupation with identifying new sources of economic growth; episodic promotion of ICT, biotechnology, Islamic finance, tourism, services, etc.

- Key policy thrusts include human resource development, innovation cluster-ing, etc. i.e. knowledge-driven activities.

- After 50 years of empowerment through development, citizens are edu-cated, have choices and less susceptible to patronage.

- Close political-economic nexus also necessitated being trade, market and private enterprise-friendly to large degree.

22

- Growth and development story incomplete without (A) primary commodities, (B) foreign direct investment, and (B) oil and gas to furnish foreign reserves.

- In late 1980s to mid-1990s, growing economic confidence led to massive in-frastructure privatization, supported by foreign capital inflows.

- Malaysia moved from being ‘someone else’s production platform’ to recogni-tion as a significant economic entity and market in its own right.

- 1997 Asian Financial Crisis meant “openness” threatened stability of mul-tiracial coalition; political-economic nexus, however, was not at risk.

- Rebounding from contraction in 2009, GDP rose at a faster rate than antici-pated in the first half of 2010.

- Exports recovered strongly, sparking a broad-based increase in domestic demand that powered the growth in GDP.

23

Foreign Investments

SOURCE: MIDA

FDI2009

NewExpansion /

Diversification Total

Number of projects 471 295 766

Potential Employment

39,706 24,624 64,330

Total Capital Investment (US$ mil)

6,447.8 3,095.1 9,542.9

- Domestic (US$ mil) 1,653.5 1,414.4 3,067.9

- Foreign (US$ mil) 4,794.3 1,680.8 6,475.0

Foreign Investments To Malaysia In 2009

COUNTRY

2009

No. of projects

Foreign Investment

(US$)

Japan 54 2,058,886,863

Hong Kong 7 1,554,289,782

USA 19 685,668,785

Singapore 92 582,588,744

Taiwan 32 209,384,375

Netherlands 21 140,262,261

Korea,Rep. 11 133,193,666

Foreign Investments By Country 2009

NOTES: • Summation of totals may not be exact due to

rounding difficulties.• 2009 : US$1 = RM3.42

24

Malaysia’s Trade openness

• Source: Department of statistics Malaysia, various years.

Source: Department of statistics Malaysia, various years.

25

Outcomes of Economic Transformation

Transformation into an upper middle income economy

− 7-fold increase in per capita income from RM1,132 in 1970 to RM25,800 in 2008

− Incidence of absolute poverty reduced from 49% in 1970 to 3.6% in 2007

Sectoral diversification into services and manufacturing

− Services share of GDP grew from 42% in 1970 to 55% in 2008

− Manufacturing share of GDP rose from 13% in 1970 to 29% in 2008

26

2000 2001 2002 2003 2004 2005 2006 2007 20080.0%

5.0%

10.0%

15.0%

20.0%

25.0%

30.0%

35.0%

Investment Abroad / Nominal GDP


Investment Abroad

27

Innovation Challeng and the Restructuring of theMalaysian Economy

Value drivers, levers and enablers in the economic value chain

28

The New Economic Model

From a Middle Income to a High Income Economy by 2020.

New Economic Model is expected to be anchored on:- Innovation - Creativity- High value sources of growth- Modern services sector- Skilled manpower

29

3030

Private sector leads, Government Facilitates,

Review of subsidies,

Innovation, creativity, value-added activities

Government Transformation

Programme

New Economic Model

10th Malaysia Plan

The Way Forward

30

Issues and Challenges

- Middle income trap.- Slower economic engine and emergence of other developing economies.- Declining investment and attractiveness as investment destinations.- Composition of exports were mainly commodities and low value-added

manufactured products.- Slow productivity growth due to low creativity and product innovation (less focus on R&D). - High dependency on low skilled workers and foreign labors. - Critical stage of human capital – brain drain, migration.- Wider gap between the rich and poor.- The Government is burdened with subsidies.

31

Reference Saleem, Ayesha, et al. 2009. “Malaysia’s economic situation from Macroeconomics per-

spective”.( google: ppt)

Wong,Steven C.M. “Malaysia’s Growth and Development Story”. (google:ppt)

Zakaria, Muhd Shahrulmiza.2009. “Malaysian New Economic Model”. (google:ppt)

32

Thailand

33

34

Thai Economy

Avg. GDP Structure (%) External

GDP Growth

(%)

Agriculture Industry Service Sector (X+M/GDP)

(%)

1960s 8.4 29.0 22.6 48.3 38.7

1970s 6.9 24.5 26.1 49.4 43.7

1980s 7.2 18.4 30.3 51.3 54.7

1990s 5.3 11.4 38.4 50.2 85.1

2000 4.8 10.3 41.1 48.6 114.5

2005 4.5 8.7 43.9 47.4 123.8

Source : NESDB

35

Major Economic Indicator-Thailand

2007 2008 2009 2010e 2011f



Economic growth (%) 5.0 2.5 -2.3 7.8 4.3

Unemployment rate (%) 1.4 1.4 1.5 1.1 1.6

Consumer price inflation (%) 2.2 5.4 -0.9 3.3 3.8

Exchange rate (D/dollar) 34.52 33.31 34.29 31.69 30.22


15,677 2,210 21,862 15,416 9,494



Foreign reserve (million dollar) 85,110 108,317 133,599 165,656 ..

Debt balance/GDP (%) 25.0 23.8 26.7 25.7 25.1


Thai and World Economy: Trends and Projection

-2.4

-4.1-5.2

-2.2

1.5

-0.5

2.34.9

3.62.2

6.3

10.1

2.7 4.61.9

1.7

2.94.5

10.4

5.1

2.8

2.9

2.0

11.6

5.2

13.0

4.9

2.4

2.72.0

5.22.6

9.6

-1.20.60.4

3.0

-0.6

9.17.8

10.5

2.8

1.72.6

4.8

1.1

4

9.5

1.64

9

1.8 1.1

4

-10.0

-5.0

0.0

5.0

10.0

15.0

World USA Euro Zone Japan China Thailand

2004 2005 20062007 2008 20092010 2011 2012

Note : 2004-2011 Actual Source : IMF, World Economic Outlook (September 2011)

(%)

(36)

Note: Update September 2011

Source: IMF. World Economic Outlook (September 2011)

Thailand GDP Growth Trends and Forecast

4.41.8

45.14.92.5

-2.2

4.66.37.1

5.3

2.2

4.8

-10.2

-1.4

5.9

9.298.38.18.6 7.8

-15

-10

-5

0

5

10

15

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

(%)

(37)

38

Economic Development

• Adopted market capitalism since 1960

• During 1960s – 1970s, the role of external sector was still small, less than 50% of GDP

• From 1980s --- greater foreign exposure resulted from various trade and investment promotion policies,

- Investment Promotion Act, 1977

• Encourage FDI

• Set out the types of rights and benefits offered to foreign investment

• BOI has been established to promote FDI to Thailand

- Export-oriented strategy in 1982

• From 1960 – 2010, Share of external sector has increased overtime,

especially during 1980s

- Agricultural share decreased, whereas industrial share increased

39

- Share of external sector increased from 75.8% in 1990 to 89.8% and 98.7% in 1995 and 2000 respectively

- More linkage with global capital market

Exports Outstanding Foreign Capital Inflow (USD Bn.)

(USD Bn.) Debt (USD Bn.) FDI PI Loans Total

1991 28.3 37.9 3.7 2.3 13.6 19.6

1993 36.6 52.1 2.6 11.0 18.2 31.8

1995 55.7 100.8 3.0 10.1 21.4 34.5

1997 56.7 109.3 5.1 24.8 17.9 47.8

Source: BOT

Potentials of Thailand in ASEAN

Country

Population

(thousand)

CountryGDP(US$ mil.)

CountryGDP per Capita (US$)

Country

Total Trade(US$ mil.)

1. Indonesia 234,181 1. Indonesia 708,032 1.Singapore 43,929 1. Singapore 699,273

2. Vietnam 86,930 2. Thailand 318,709 2. Brunei 28,830 2. Thailand 377,719

3. Thailand 67,312 3. Malaysia 238,849 3. Malaysia 8,262 3. Malaysia 364,531

4. Philippines 60,163 4. Singapore 223,015 4. Thailand 4,735 4. Indonesia 293,442

5. Myanmar 60,163 5. Philippines 189,326 5. Philippines 3,149 5. Vietnam 156,993

6. Malaysia 28,909 6. Vietnam 107,650 6. Indonesia 3,023 6. Philippines

109,660

7. Cambodia 15,269 7. Myanmar 35,646 7. Vietnam 1,238 7. Brunei 11,952

8. Laos 6,230 8. Brunei 11,952 8. Laos 1,045 8. Myanmar 11,798

9. Singapore 5,077 9. Cambodia 11,168 9. Cambodia 731 9. Cambodia 10,480

10. Brunei 415 10. Laos 6,508 10. Myanmar 592 10. Laos 6,938

Source : ASEAN Secretariat, 2010

40

Potentials of Thailand in ASEAN (cont’)

Country

FDI inflow (ml.

US$)

Country

Change in FDI inflow

(%)

Country

Tourist Arrival

(thousand)

Country

Change in

tourist arrival

(%)

1.Singapore 35,520 1. Malaysia 525.8 1. Malaysia 24,577 1. Vietnam 33.9

2. Indonesia 12,737 2. Indonesia 161.2 2. Thailand 15,936 2. Laos 25.1

3. Malaysia 8,643 3. Singapore 132.5 3. Singapore 10,511 3. Cambodia 16.0

4. Vietnam 8,000 4. Brunei 70.3 4. Vietnam 5,050 4. Thailand 12.6

5. Thailand 5,778 5. Cambodia 45.2 5. Vietnam 4,735 5. Indonesia 10.7

6. Philippines 1,713 6. Thailand 16.1 6. Philippines 3,292 6. Philippines

9.1

7. Cambodia 783 7. Vietnam 5.3 7. Laos 2,513 7. Singapore 8.6

8. Brunei 629 8. Laos (12.5) 8. Cambodia 2,508 8. Malaysia 3.9

9. Myanmar 579 9. Philippines (12.7) 9. Myanmar 792 9. Myanmar 3.8

10. Laos 279 10. Myanmar (40.7) 10. Brunei 112 10. Brunei (29.2)

Source : ASEAN Secretariat, 2010

41

International Trade of Thailand

2.6

23.5

1419.3

-16.1-14.7-4.6

-0.3

12.70.9

-8.21.43.82.72.5

5.59.312.3

-8.8-8.6-7.9-9.5

6.0

0

20

40

60

80

100

120

140

160

180

200

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

-100

-80

-60

-40

-20

0

20

Export Import Balance

(Bil. US$)

Source : Thailand Statistical Office.

(%)

(42)

Thailand International Reserves

18.421.225.430.337.038.7

27.029.534.832.733.038.942.149.852.1

67.0

87.6

111.0

175.1180.4172.1

138.4

020406080

100120140160180200

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

(Bil. US$)

Note : As of Feb 2012Source : http://www.bot.or.th/Thai/Statistics/Indicators/Docs/indicators.xls : Table8

44

Indonesia

45

46

Major Economic Indicator-Indonesia


2007 2008 2009 2010e 2011f



Economic growth (%) 6.3 6.0 4.6 6.1 6.1

Unemployment rate (%) 9.1 8.4 7.9 7.1 6.7


Exchange rate (D/dollar) 9,141.0 9,699.0 10,389.9 9,090.4 8,612.2

Current account balance (million dollar) 10,493 126 10,192 6,294 8,175



Foreign reserve (million dollar) 54,737 49,339 60,572 89,970 ..

Debt balance/GDP (%) 33.0 29.6 29.1 22.8 20.0

10.7

5.1

3.7 4

.7

2.3

6.0

1.5 2.4

(0.1

)

9.1

3.2

8.0

(0.2

)

1.1

(1.7

)

5.3

0.2

(6.1

)

1.5

(4.9

)

14.5

10.3

8.8

8.6

7.5

7.3

7.2

6.8

6.2

6.1

5.5

4.3

1.3

6.3

1.8

9.6

6.9

(1.2

)

4.6

-12%-10%-8%-6%-4%-2%0%2%4%6%8%

10%12%14%16%18%

Sin

gapore

Chin

a

Peru

India

Bra

zil

Philippin

es

Mala

ysia

Vie

tnam

South

Kore

a

Indonesia

Mexic

o

Colo

mbia

UK

2008 2009 2010

5.7

3.3

5.3

0

1

2

34

5

6

7

8

2006-2010

IndonesiaBBB-rated Sovereign medianBB-rated Sovereign median

0.9

3.4 3.2

0

1

2

3

4

5

2006-2010

IndonesiaBBB-rated Sovereign medianBB-rated Sovereign median

Demonstrated resilience throughout the global financial crisis

Source: Ministry of Finance and Moody’s Statistical HandbookRanked according to 2009 GDP growth rate

Lower Growth VolatilityAbove Average GDP Growth

Source: Fitch Ratings, as of 2010 (latest available)

4.9%

3.6%4.5% 4.8% 5.0%

5.7% 5.5%6.3% 6.0%

4.6%

6.1% 6.5%

-4%

-2%

0%

2%

4%

6%

8%

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 Budget2011

IndonesiaBB-rated Sovereign medianBBB-rated Sovereign median

2006 – 2010 Avg. = 5.7%

5-year Standard Deviation

5-year Real GDP Growth Average (%) Volatility of GDP (%)

A Story of Growth and Stability…

Source: Ministry of Finance, BPS, Bank Indonesia and Moody’s; Moody’s Medians

Strong and Consistent Real GDP Growth (% yoy)

Source: Ministry of Finance, BPS and Bank Indonesia*Medians derived from S&P – no data available between 2000 to 2003

47

29

4954

1924

87

3

36

75

27

5144

22 26

85

3

38

59

26

5646

24 21

75

2

39

65

Chi

na

Indi

a

Indo

nesi

a

S K

orea

Mal

aysi

a

Phi

lippi

nes

Sin

gapo

re

Tha

iland

Vie

tnam

2009

2010

2011

Realized Foreign Direct Investment (USD bn)

Realized Domestic Direct Investment (Rp tn)

Source: BKPM

6.0

10.3

14.9

10.8

16.2

2006 2007 2008 2009 2010

20.8

34.9

20.4

37.8

60.6

2006 2007 2008 2009 2010

FDI By Sector (USD mm)Significant Improvement in the Global Competitive Scorecard

Source: World Economic Forum

GC Index Rankings

2,229704747

1,612628 1,183

955

714

1,293 655439 756 706647

8,530

5,0463,204

4,006

3,676

4,100

6,462

1,4281,050

4,1713,305

16,215

10,815

14,883

10,341

5,992

0

2,000

4,000

6,000

8,000

10,000

12,000

14,000

16,000

18,000

2006 2007 2008 2009 2010

Real estate, industrial estates and business activitiesElectricity, gas and w ater supplyOther sectorsTransportation, storage and communicationsTrade and repairMotor vehicle and other transport equipmentMetal machinery and electronicChemical and pharmaceuticalPaper and printingFoodMining

Source: Bank Indonesia

Source: BKPMNote: USD / Rp. exchange rate of 8,597, the BI middle exchange rate as of June 31, 2011. US dollar val-ues are for convenience only

Strong Investment Underpinned by Competitiveness and Stability

USD6.7bn

Indonesia’s growth remains strong in Q2 2011…

• Some countries experienced some GDP slowdown vs Q2-2010. • Indonesia GDP growth in Q2-2011 was 6.5% or higher than Q2 2010 of 6.1%.

Source: Statistic Bureau (BPS) & Bloomberg

GDP Growth (%)

49

Global inflation tends to increase along with the higher food and energy price….

- Higher food and energy prices have driven higher inflation in China

and USA- Inflation in ASEAN also tends to increase in which Vietnam

shows the highest inflation 23.02%.

Inflation in ASEAN Inflation in Developed Countries

Feb-09

Apr-09

Jun-09

Aug-09

Oct-09

Dec-09

Feb-10

Apr-10

Jun-10

Aug-10

Oct-10

Dec-10

Feb-11

Apr-11

Jun-11

Aug-11

-3

-1

1

3

5

7

3,63*

2,50

2,40

6,20

0,20*

USA Uni EropaJerman ChinaJepang

%

Feb-09

Apr-09

Jun-09

Aug-09

Oct-09

Dec-09

Feb-10

Apr-10

Jun-10

Aug-10

Oct-10

Dec-10

Feb-11

Apr-11

Jun-11

Aug-11

-5

-1

3

7

11

15

19

23

4,29

5,44*

4,25

4,79

3,40*

23,02Thailand Singapura Philipina

Indonesia Malaysia Vietnam

%

50

Trading Partnership

Japan 23.20%

China 4.46%

South Korea 6.95%ASEAN

17.49%

USA 13.64%

Others19.94%

PIIGS3.01%

Other Europe11.31%

2000

Japan 21.07%

China 7.78%


18.47%USA 11.52%

Others21.01%

PIIGS2.92%

Other Europe8.96%

2005

Japan 16.34% China

9.90%


20.98%USA

8.99%

Others25.17%

PIIGS3.17%

Other Europe7.47%

2010• Indonesia’s export shares to Japan and US has been declining, however export to ASEAN coun-tries and China increase. In addition, export share to PIIGS relatively small (3.17%).

• It shows that the exposure from US and PIIGS debt crisis will be limited for Indonesia.

5151

Indonesia’s Economic Growth and Projections

page 52Source: Indonesia Forum Foundation (Yayasan Indonesia Forum), team analysis

Projected GDP per capita - Indonesia Vision 2030

Lower MiddleIncome Country

Upper MiddleIncome Country

HighIncome Country

1992 2015 2023

Indonesia Vi-sion 2030

Economic Projection 2011 - 2045

1990 1995 2000 2006 2010 2015 2020 2025 20300

5,000

10,000

15,000

20,000

25,000

3,005

5,300

9,000

14,900

22,500

1,6602,359

3,923

7,231

12,449

18,000

GDP per capita reached

US$3,005 in 2010

$

2005 2006 2007 2008 2009 2010 2011 2012

-2.5

-2.0

-1.5

-1.0

-0.5

0.0

Sustainable Fiscal Management

Debt to GDP Ratio Has Been Sharply Declining Since Crisis Pe-riod

Debt to GDP Ratio Has Been Sharply Declining Since Crisis Pe-riod

Fiscal Deficit (% of GDP)Fiscal Deficit (% of GDP)

8-year fiscal deficit average= -

1.1%

Source: FPO

1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010* 2011-Revised budget

2012P0

1,000

2,000

3,000

4,000

5,000

6,000

7,000

8,000

9,000

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

85% 89%

77%

67%61%

57%

47%39%

35% 33%28% 26% 25% 24%

GDP Outstanding Debt Debt to GDP Ratio (RHS)

(Trillion IDR)

53

Growth Projections

Source: International Monetary Fund, World Economic Outlook Database, April 2011

GPD Nominal Growth (2009 – 2015)

15.7%

14.5%

12.4%

12.1%

11.7%

10.0%

9.9%

4.1%

4.0%

9.6%

Indonesia

Russia

China

India

Brazil

Turkey

South Korea

Japan

USA

ASEAN (excl. Indone-sia)

54

Strengths

Based on 2010 GDP per capita (US$3,005), Indone-sia has reached the critical threshold rapid growth in consumption, discretionary and luxury spending

Rise of Consumer Spending

Power

Natural Resources

Economic growth, including key emerging markets driv-ing demand

– Hard commodities, e.g. metals, oil, coal, etc.

– Soft commodities, e.g. rubber, palm oil, etc.

Continued development of infrastructure: transportation, energy, communications, wa-ter & waste, etc.

Infra-structure

55

Conducive National Conditions

Political Environ-

ment

Resilient Financial System

Maturing democracy Regional autonomy Supportive regulations balanced open markets Strengthening institutions

Government debt and foreign reserves at healthy levels Improving investment climate Indonesian banks performed well during global crisis

Increas-ingly inte-

grated networks

Regional – improving efficiency of domestic production and distribution chains

Global – geographic position provides excellent access to India, China, Japan, etc.

56

57

Exports Performance

Constant prices Current price

Price ef-fect

Growth Growth Growth Growth

90-96

96-06

Categories

1990 1996 1998 1999 2004 2006*90-'96 96-06

1990-'96

1996-'06

Oil/Gas 13.1 15.1 14.4 14.3 11.1 9.3 2.4 -4.7 8.4 6.2 6.0 10.9

Rubber 0.9 1.4 1.6 1.5 1.9 2.3 8.4 5.1 18.7 9.210.

3 4.0

Coffee & Cocoa 0.7 0.9 0.9 0.9 0.9 1.3 4.6 4.1 12.9 4.2 8.4 0.1

Minerals 2.1 4.3 11.2 5.4 8.9 10.1 13.0 8.8 19.4 14.0 6.4 5.2

Copper 0.4 1.9 2.1 2.2 2.0 2.5 28.7 3.0 27.8 12.0 -1.0 9.0

Nickel and Tin 0.4 0.5 0.6 0.5 1.0 1.3 6.2 9.1 4.9 14.3 -1.3 5.1

58

Constant prices Current price

Price effect

Growth Growth Growth Growth90-96

96-06

Categories90 96 98 99 04 06*

90-'96 96-061990-'96 1996-'06

Total non-oil/gas 11.1 33.2 101.1 55.4 58.3 68.0 20.0 7.4 26.3 6.8 6.4 -0.6

Labor intensive manufactured exports

Textiles & footwear 2.2 8.0 7.8 11.0 10.3 12.1 23.6 4.2 23.3 1.6 -0.3 -2.6

Furniture 0.2 0.8 0.5 1.4 1.8 1.8 22.4 8.5 23.5 5.6 1.0 -2.9

Total-labor intensive manuf. 2.5 8.8 8.3 12.4 12.1 13.9 23.5 4.7 23.3 2.1 -0.2 -2.6

Cont’d

Philippines

59

Skewed Wealth, Skewed Growth

Richest 1% account for 60% of GDP

Income of top 150,000 families = income of bottom 6 million

Only 3 of richest 15 are into manufacturing

Wealth Increase of 40 Richest vs. Absolute Increase in GDP (2011)

Philippines: $13 billion vs. $17 billion (76.0%)

Thailand: $9 billion vs. $26.7 billion (33.7%)

Malaysia: $2.3 billion vs. $41 billion (5.6%)

Japan:

$11 billion vs. $381 billion (2.8%) 60

Philippines and Thailand

Thai Phil Thai PhilPopulation (million) 36 36 66.9 92.2Population G.R. (%) 3.1 3.1 0.6 2.0GDP Per Capita (US$) 250 250 4062 1796GDP Share (%) Agriculture 32.0 26.0 11.6 14.8 Industry 23.0 27.5 43.3 30.2 Services 45.2 46.7 45.1 55.0

Gross Dom Inv (%GDP) 20.0 20.0 21.8 14.6Gross Dom Saving (%GDP) 18.5 20.3 31.7 15.6

FDI Stock (Billion US$) 7.8 2.3 93.8 22.91998 2009

Indicator1970 2009

1965 2009

61

Philippines & Indonesia

62

Human Development Indicators(Worsened in Past Decade)

• No. of poor Filipinos went up by 970,000, or 185,000 families between 2006 and 2009 (Poverty line: P7,017/month per family of 5)

• Net elementary school participation rate fell from 97% in 2001 to 85% in 2008

• Net high school participation rate fell from 66% to 62%

• Malnutrition incidence went up in most provinces

• Wide disparities persist in life expectancy across provinces

63

:Inflation Trends, 2007-Present (%)

2.8%

9.3%

3.2% 3.8% 4.4%

2007 2008 2009 2010 2011

64

Opportunities of the Philippines Economy

• Continuous influx of East Asian tourists

• Expansion in mining and energy investments

• Pump priming in infrastructure spending

• Above-average growth in agricultural production due to im-proved infrastructure support

• Expansion in low- and medium-costs housing and office build-ings

• Medical tourism and retirement villages

65

Threats to the Philippines Economy

• Net factor income will be slightly lower as the recession host countries will affect remittances and deployment growth

• Slowdown in consumer spending

• Industry sector on a slowdown in 2009 and 2010

• Slowdown in exports

• High though slowing inflation rate

• Higher government deficit

• Higher trade deficit

• Depreciating Peso

66

References

Hellendorff, Bruno. 2013. “Military Spending and Arms Transfers in South-east Asia: A Puzzling Modernization”. GRIP.

International Strategic Analysis. 2013. “ISA Region Report East Asia and Pacific”.

Majid, Munir. 2012. “Southeast Asia between China and the United States”. IDEAS reports - special reports, Kitchen, Nicholas (ed.) SR015. LSE IDEAS, London School of Economics and Political Science, London, UK.

Mohan, C. Raja. 2013. “ Emerging Geopolitical Trends and Security in the Association of Southeast Asian Nations, the People’s Republic of China, and India (ACI) Region” ADBI Working Paper Series. No.412.

67

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