Indonesia as the New Center of Global Growth

Wishnu Wardhana
ABAC Chair 2013 and APEC CEO Summit 2013 Chair Universitas Airlangga 19 April 2013

Global economic context is continuously changing

The great moderation (1980-2000)

Shocks

The great uncertainty (2010-2030)

Lower OECD growth given demographics and debt The emergence of the middleweights More expensive and volatile resource prices Large potential for disruptive technological opportunities, particularly in natural resources Increasing state intervention in markets

Demographic dividend in the OECD

Cheaper resources Cheaper labour Low correlation and volatility Low unemployment

Debt crisis
Aging in OECD and China Emerging (and urbanizing) middle class

More challenging access to resources

Increasingly interconnected world

Governments getting out of the way

Source: McKinsey Global Institute

Asia was the majority of the global economy until the Industrial Revolution and its economic renaissance is well under way
Share of total world GDP Percent Fall of Roman Empire 100 Rest of world Marco Polos trips to Asia Discovery of America Industrial revolution

80
Europe 60 North America Rest of Asia Japan India China 0 500 1000 1500 1800 1970 2000 2010 2020 2030 China

40

20

Source: Angus Maddison, Historical Statistics for the World Economy: 1-2003 AD; Global Insight; McKinsey Global Institute

Recent crisis shows increasing linkage of the global economy and becomes the worlds first truly global recession since World War II
World total growth Recession period

Real GDP growth PPP adjusted %

7 7 6 6 5 5 4 4 3 3 2 2 1 1 0 0 -1 -1 -2 -2 1950 1950 54 54
58 58 64 64 68 68 72 72 76 76 80 80 84 84 88 88 92 92 96 2000 2000 04 04 96 08 10 08 10

SOURCE: Penn state university Global GDP tables (1950-2003); WMM Global insight (2004-10)

This economic transformation is happening at a scale and a rate faster than ever in history
Population at start of growth period Britain (1700-1855) US (1820-1873) Germany (1830-94) Time to double GDP per capita1 155 53 64

9 million 10 million 28 million 47 million

Japan (1906-39)

33

Indonesia (1972-91) China (1983-95) India (1989-2006)

123 million
1,020 million

19 12 17

820 million

Time to increase GDP per capita (in PPP terms) from 1,300 to 2,600 USD 4

SOURCE: Angus Maddison, University of Groningen

More recently, we have seen shift of economic growth to Southeast Asia

U.S. U.S. debt crisis is turning into fiscal crisis and the U.S. can no longer be seen as the engine of growth

Europe European crisis continues with an enormous structural challenge to its whole financial system

China and India China and India were used to be seen as the anchors of global growth, but their slowdown is expected to result in growth below what has ever been achieved before

ASEAN with Indonesia being the biggest economy

has shown stronger and more robust climate and will become the new centers of growth in the region

Today, Indonesia has positioned itself as the new center of global growth

Indonesia will continue to grow significantly in the next decades

Source: The archipelago economy: Unleashing Indonesias potential, McKinsey, 2012

and 2013 will be a very important momentum as Indonesia hosts APEC again after 19 years

2013
Bali, Indonesia

1994
Bogor, Indonesia

APEC Leaders will reunite in Bali to push progress even further for the welfare of the people in Asia Pacific THE WORLDS MOST DYNAMIC ECONOMIC REGION 3 billion people in 21 economies 55% of global GDP 44% of global trade 45% of global Foreign Direct Investment (FDI)

APEC Leaders set the Bogor Goals as the main targets of APEC

Liberalized trade and investment by 2010 for industrialized economies & by 2020 for developing economies

44 % of poverty reduction since 2000

8

Success of APEC policies and their impact relies on Public-Private Partnership (PPP)

G
Government

B
Business

A
Academic

PPP as an application of Triple Helix Concept of ABG

Academic, Business, and Government

9

Government, business, and academic community play equally critical roles in making a landmark success for Indonesias APEC Chairmanship
Roles in APEC
Governments of the 21 economies Develop policies to support sustainable economic growth and prosperity in Asia-Pacific Turn policy goals into concrete results and agreements into tangible benefits APEC Business Advisory Council (ABAC) Permanent high-level business advisory group created by APEC Leaders as direct channel for business input to APEC Consist of business leaders representing the 21 economies Universities and think tanks Source of new knowledge and technology, the generative principle of knowledge-based economies

Key milestone in 2013

Ministers Responsible for Trade Meeting: Surabaya, 20-21 April SME and Finance Ministers Meeting: Bali, 6-8 and 19-20 September APEC Economic Leaders Meeting: Bali, 7-8 October 4 ABAC Meetings in Manila (January), Singapore (April), Kyoto (July), and Bali (October) APEC CEO Summit 2013: 5-7 October

Public lecture at Univ. Airlangga: TODAY! Other engagements and socialization events
10

APEC CEO Summit 2013: Bali, 5-7 October 2013

Towards Resilience and Growth:

Reshaping Priorities for Global Economy

Premiere business event discussing most-pressing business issues and trends in Asia-Pacific and the global markets 21 APEC Leaders will attend the Leaders Week, most will address the APEC CEO Summit New newly re-elected leadership from Australia, China, Mexico, South Korea, and USA Last year in office for Indonesias President Susilo Bambang Yudhoyono 1100+ top business delegates representing global businesses; Large delegations from China, Korea, Japan, the USA, and Indonesia

11

INDONESIA
is known to the world as a strong economy building on its big population and young demography

BIG POPULATION
should not mean we are merely the market of foreign business but the producer of value-added goods and services while maintaining home to our own products

YOUNG DEMOGRAPHY
should not mean our young men and women only serve as social networking apps consumers

but the driver to national productivity through flourishing entrepreneurship, creative economy, and other ways to enhance our competitive advantage at the global stage
12

20 YEARS FROM NOW

as Indonesia plays host to APEC again

YOU, OUR BELOVED STUDENTS

will be the leaders of business, government, academia, etc. who demonstrate that

INDONESIA
is at

THE CENTER OF THE GLOBAL ECONOMY

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Indonesia as the Center of Global Growth

Wishnu Wardhana
ABAC Chair 2013 and APEC CEO Summit 2013 Chair Universitas Airlangga 19 April 2013