exports. Values above 1 indicate that Indonesia is specialized in the product under review, or Indonesia’s global competitiveness for that product is higher than the world average. Values below 1 indicate that Indonesia is not
specialized in the product review, or its global competitiveness is lower than the world average. As an illustration, based on data from the Ministry of Industry Deprindag, Figure 3 presents RCAs of
Indonesia and Malaysia, which indicates that Malaysia is indeed the heaviest competitor for Indonesia in palm oil trade, as in most years the RCA of Malaysia is higher than that of Indonesia.
Figure 3: RCAs of Malaysia and Indonesia for Palm Oil, 1996-2002
18.64 28.56
17.7 23.33
23.68 22.03
29.39
31.64 28.47
38.38 29.74
23.36 26.61
26.09
10 20
30 40
5
1996 1997
1998 1999
2000 2001
2002
Indonesia Malaysia
Source: Deprindag database
Another way of assessing the global competitiveness of a country is what the World Economic Forum WEF annually does in over 100 countries in the world for its The Global Competitiveness Report. The global
competitiveness of a country according to the WEF is determined by three groups of factors as presented in Figure 4. The focus of this study is on the competitiveness of a nation, not a particular product not like RCA,
for instance. However, no doubt, the competitiveness of country will affect the country’s capability to compete in the global markets.
This year, The Global Competitiveness Report 2007-2008 from WEF shows that the position of Indonesia is in the 54
th
place from 131 countries covered in the survey, compared to the 50
th
from 125 countries from last year 2006-2007 Table 1.
During the survey, the respondents in each country have been asked about their main business constraints. For Indonesia, based on percentage of respondent, it turned out that three business obstacles ranked at the
highest position is inadequate supply of infrastructure, followed by inefficient government bureaucracy and difficulties in access to financing. With respect to bureaucracy, many respondents believed that it is the most
inefficient practice to delay the growth of business in Indonesia. Inefficient bureaucracy increase business costs, 6
time wasted in managing business permit which means loosing the chance to gain profit.
Figure 4: Three Groups of Determinant Factors of Nation’s Competitiveness version M. Porter
Sumber: WEF 2007
Table 1: Ranking of Indonesia in the Global Competitiveness Index GCI
No 2007-2008 2006-2007
2005-2006 1
2 3
4 5
6 7
8 9
10 USA
Switzerland Denmark
Sweden Germany
Finland Singapore
Japan UK
Netherlands Indonesia 54
Switzerland Finland
Sweden Denmark
Singapore USA
Japan Germany
Netherlands UK
Indonesia 50 USA
Finland Denmark
Switzerland Singapore
Germany Sweden
Taiwan, China UK
Japan Indonesia 69
Source: WEF 2007, 2006, 2005
7
8 Figures 6 and 7 may give some clue about, respectively, main current factors to the low Indonesian
competitiveness low, and business environment facing Indonesian entrepreneurs.
2008.
20.5 16.1
