Thailand’s economic growth has still been in the
long recession for almost ten years, from 2006 until now, because of political
conflict among red shirts and yellow shirts. As well as Thailand’s neighbor, Indonesia, now Indonesian
has been facing their slowest GDP growth since 2009, yet they have been caused
by the different problems.
From BBC news report “Indonesia posts slowestGDP growth since 2009”, Indonesia’s growth has dropped significantly, because accumulated problems such as high interest rate, fall of foreign investment and income inequality. Most of them have been caused by missing policy of the governments and the central bank.
From BBC news report “Indonesia posts slowestGDP growth since 2009”, Indonesia’s growth has dropped significantly, because accumulated problems such as high interest rate, fall of foreign investment and income inequality. Most of them have been caused by missing policy of the governments and the central bank.
After
I already read this news, I thought that Thailand and Indonesia have some same
problems, which have impeded them to grow normally as they have, for example,
the gap between the rich and the poor in two countries and too much supporting
local investor policies – in the news call them “nationalistic policies”.
For the
first problem, it is obvious that this is such a crucial one because the inequality
among citizens could bring about conflicts obstructing economic growth. On a
regular basis, rich people and poor people live in the different environment,
do the different jobs and think in the different ways. Consequently, the
difference may turn to the conflict if individuals cannot accept dissimilarity,
and when a conflict takes place, it will decrease credibility of the nation. Thailand
is one of the good studies showing how bad income distribution develops to political
conflict. I’m not an expert in Indonesia political economy but I think this
country is in the same pattern as Thailand, at least the poor and the rich, in
every country, usually support the different political party raising the
different policies, including Indonesia.
However,
for the second problem, nationalistic policies, most people believe that these
are good policies. Yes, they could be good policies, but they are not always! Everything
has advantages and drawbacks. It depends on how we use it. It depends on the
situation. Regarding Indonesia instance, most economists are of the opinion
that it’s too much. Indonesia’s government supports their local investor, so
foreign investors might be treated unfavourable. As a result, they will no
longer intend to invest in Indonesia, and the competitiveness in Indonesian market
will decrease. This means that Indonesian owners do not need can do their
business without any pressure. So, what are the drawbacks? There is no drawback
at all if the government favours in the fitting rate, yet from economists view
they too much favour local business men. Therefore, apart from the decrease of FDI
that play a vital role in economic growth, without any pressure, Indonesian
owners do not need to improve their products anymore. By doing this, in long-run,
Indonesian industries could not compete with other foreign industries in the
global market. Besides, the tiny number of companies in the Indonesia might
allow powerful companies to conspire with other big companies and control the
market price more easily. Economists call markets which has structure like this
“Oligopoly”.
Indonesia posts slowest GDP growth since 2009 (2014, May 5). BBC News Business. Retrieved from May 5, 2014 from
http://www.bbc.com/news/business-27280988
I'm reading P's post just after having read Ploy's, which is above it, and I agree with P that this is another example where government interference is a bad thing, especially when governments, such as the Thai government, make it illegal or difficult for non-Thai people to do business.
ReplyDeleteFor example, in Thailand, foreigners cannot freely buy land, and this is bad for Thai farmers: their land looses value because it can only be bought by Thai people, which keeps the price unnaturally low, with the result that wealthy Thai people can get the land cheaply. This further increases the income gap between rich and poor, and contributes to the social divisions that P mentions.
I think countries are better off when governments do not do so much to limit free markets and to limit personal freedom.
of course! i do agree with you Peter.
Deletein fact, i believe that intervention or interference are not always badness. it can be a good thing as well if it is launched appropriately. from my knowledge, market is able to be failure as well, and in this case government should intervene to solve the failure of the market.
After reading P's post, I'm trying to guess why Indonesia government continues their interference. And the first thing I think about is political corruption. The high-level government officer might get some benefits from local business person or they might be a shareholder or owner in that business. It's quite similar to Thailand that politician still involve in many kinds of business. Finally, this could lead them to the political conflict.
ReplyDeletei agree with P'Ben, in most developing countries, politician often has significant relation to big company, perhaps bribe or holding share of those companies. Yet, apart from corruption, many governments launch projects inappropriately because they want to protect "infant industry" or "sensitive sector", but too much protection is not good at all, likewise children education.
DeleteOn the other hand, i think too much relying on foreign trade and foreign investment is not a good idea as well. in my opinion the best way is to balance nationalism and interaction with foreign investor. however, it isn't easy to identify the optimal balance point. This is the real world, we have to keep trial and error.