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

1

“The great uncertainty”

(2010-2030) Shocks

“Demographic dividend”

in the OECD

Cheaper resources

Cheaper labour

Low correlation and

volatility

Low unemployment

Governments “getting out

of the way”

Debt crisis

Aging in OECD and China

Emerging (and urbanizing)

middle class

More challenging access to

resources

Increasingly interconnected

world

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

“The great moderation”

(1980-2000)

Source: McKinsey Global Institute

Asia was the majority of the global economy until the

Industrial Revolution and its economic renaissance is well

under way

2

40

60

80

20

China

0

100

2000 2010 2020

Rest of

world

Europe

North

America

Rest of Asia Japan

India

China

2030

Discovery

of America

Fall of

Roman Empire

Industrial

revolution

Marco Polo’s

trips to Asia

1970 500 1000 1500 1800

Share of total world GDP

Percent

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 world’s first truly global recession

since World War II

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

World total growth Recession period

-2

-1

0

1

2

3

4

5

6

7

100804200096928884807672686458541950

Real GDP growth PPP adjusted

%

-2

-1

0

1

2

3

4

5

6

7

100804200096928884807672686458541950

This economic transformation is happening at a scale

and a rate faster than ever in history

4 SOURCE: Angus Maddison, University of Groningen

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

▪ 9 million Britain (1700-1855) 155

US (1820-1873) ▪ 10 million 53

Japan (1906-39) ▪ 47 million 33

China (1983-95) ▪ 1,020 million 12

India (1989-2006) ▪ 820 million 17

Germany (1830-94) ▪ 28 million 64

Indonesia (1972-91) ▪ 123 million 19

Population at start

of growth period

Time to double

GDP per capita1

More recently, we have seen shift of economic growth

to Southeast Asia

5

U.S. Europe China and India

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

U.S. debt crisis is

turning into fiscal crisis

and the U.S. can no

longer be seen as the

engine of growth

European crisis

continues with an

enormous structural

challenge to its whole

financial system

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

Today, Indonesia has positioned itself as the new center

of global growth

6

Indonesia will continue to grow significantly in the next

decades…

7 Source: The archipelago economy: Unleashing Indonesia’s potential, McKinsey, 2012

…and 2013 will be a very important momentum as

Indonesia hosts APEC again after 19 years

8

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

1994 Bogor, Indonesia

2013 Bali, Indonesia

APEC Leaders will reunite in Bali to

push progress even further for the

welfare of the people in Asia Pacific

THE WORLD’S 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)

44 % of poverty reduction since 2000

Success of APEC policies and their impact relies on

Public-Private Partnership (PPP)

9

B Business

A Academic

G

Government

PPP as an application of Triple Helix Concept of ABG

Academic, Business, and Government

Government, business, and academic community play

equally critical roles in making a landmark success for

Indonesia’s APEC Chairmanship

10

G

B

A

Roles in APEC Key milestone in 2013

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

• 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

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

• 4 ABAC Meetings in Manila

(January), Singapore (April), Kyoto

(July), and Bali (October)

• APEC CEO Summit 2013: 5-7

October

Universities and think tanks

• Source of new knowledge and

technology, the generative principle of

knowledge-based economies

• Public lecture at Univ. Airlangga:

TODAY!

• Other engagements and socialization

events

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

11

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 Indonesia’s President Susilo Bambang

Yudhoyono

• 1100+ top business delegates representing global businesses; Large

delegations from China, Korea, Japan, the USA, and Indonesia

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

13

Indonesia as the Center of Global Growth

Wishnu Wardhana ABAC Chair 2013 and APEC CEO Summit 2013 Chair

Universitas Airlangga

19 April 2013