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Addressing Indonesia's Economic Growth in Transitional Era. Do Institutions Matter?

The role of government institutions in boosting economic growth

Wissenschaftlicher Aufsatz 2015 9 Seiten

VWL - Konjunktur und Wachstum



For decades media as well as citizens frequently listen to the voice of those struggling under what it is called as economics injustice. The story of twenty-two years top and down resources exploitation in Papua, starting from Scott Paper in 1988 until mega development project of MIFEE (The Merauke Integrated Food and Energy Estate) right now, has caused many severe problems, including human right abuses, environmental devastation and enduring poverty for indigenous people while creating prosperity for immigrant workers. Another story of corruption and gratification from President Soeharto’s era until the end of President Susilo Bambang Yudhoyono’s era, covering almost all elements of political elites, ministers, governors, regents and even the prosecutors has led to the crisis of public trust towards the governments. The other story of human trafficking of Indonesian woman labors in Arab world and the high rate of unemployment, 5.7 % (BPS,2014), which is the highest after Myanmar and Philippine among ASEAN countries makes Indonesia as one of the country with a big problem of job opportunity and human resources quality. Such these stories are in no way boosting, rather obstructing Indonesian economy. Consequently, the breakthrough of new transitional government is obviously needed to tackle all these issues, addressing Indonesian economic growth in the middle of emerging market, especially under the transformation of ASEAN Economic Community in 2015, in order to provide economic justice and prosperity for all its citizens. Indeed, the new government cannot work alone to cover 240 million citizens within 34 provinces. It needs the coordination and synergy from all parties, particularly the one having the highest authority and responsibility, government Institutions.

The role of government institutions in boosting economic growth

Had observing the phenomena of what happened in Indonesia or even around the world, it seems like everything is just connected and serve as a consequence to one another. For instance, the stories raised above are very much related to the threats doubting Indonesian economic growth in the middle of emerging countries. It is the role of the transitional government to transform all these kinds of threats into such virtuous opportunities through the real performance of its institutions. For the sake of economic growth, there are at least three major roles that the government institutions have to perform:

1. Harmonizing the difference interest of people.

The main bone of contention is frequently the different interest perceived among people, for example between the management and shareholders within a company. In a broader level such as in Indonesia, where the economic actors are more varied and come from different backgrounds, the issue demand higher attention. It needs the power of legal body, such as government institutions to harmonize all of these differences. Harmonization is a core concept of the global growing economy, which is to meet the satisfaction of all economic actors, driving higher economic growth. The story of resource exploitation in Papua is also can be solved through this harmonization. Considering the interest of indigenous citizen there and revising the concept of MIFEE (The Merauke Integrated Food and Energy Estate) for example, is one of the way that the transitional government might order to end this problem. Have the citizens satisfied with the government performance, then the economic and social stability will be created, encouraging money flows inside the country, achieving higher economic growth.

2. Formulating and ensuring the laws and policies to be executed in accountability fashion.

Efficient laws and policies that can harmonize the difference interest of people for sure have profound positive social, economic, political and welfare effects. In the new transitional era, the evaluation of all the laws and policies is needed to boost the economic growth. It is then the role of the government institutions to formulate the laws and policies that triggers to the win-win situation, for example in term of the banking system, property right, local markets, international trade and business development. An increase in the laws and policies quality in such an economic sector imply to a reduction of market unfriendly environment and lowering the transaction cost. Hence, this idea will ensure the establishment of good government performance with market-based economic system, encouraging more investor to come, leading to a higher economic growth. In addition to this, the government institutions’ high quality control over the implementation of the laws and policies is also needed, both in internal and external institutions, in order to make sure that the laws and policies are executed in accountability fashion. In that way, the story of corruption and gratification might be decreased or even ended.

3. Responding the threats of world changing environment through bright shift in strategies.

High technology innovation that shapes the new changing environment demands a bright shift in strategy within the country. In order to sustain in the middle of emerging economies, the new transitional government should take in account the impact of this phenomenon. Government might respond this threat through its institutions, for example through educational institution.

Strategies reformation to produce high quality human resources to respond the need of labor market, avoid the skill gap and ensure an adequate trained human capital to support business activity is obviously needed. Technology adoption to schools and universities, soft skills and entrepreneurship training for students, and scholarship granted to poor students who have passion are some of the ways to build high quality of human resources. The increase of human resources quality, considering the outcomes of entrepreneurship training for example, will create more entrepreneurs thus providing more and more job opportunities to Indonesian citizens. In this way, GDP per capita will increase and thus high economic growth will be achieved.



ISBN (eBook)
ISBN (Buch)
976 KB
Institution / Hochschule
Universitas Syiah Kuala
addressing indonesia economic growth transitional institutions matter



Titel: Addressing Indonesia's Economic Growth in Transitional Era. Do Institutions Matter?