GLOBALIZATION

Globalization by Kristofer Hartono (XIIA2/30)

While recent problems in the West have shown the difficulty of maintaining business ethics in general, problems in developing countries are far more acute. It is unrealistic to expect a developing country to be able to apply strong business ethics where the income of the general population is poor.

In Indonesia, even the middle class have problems making much money. Young graduates entering a profession or having a job have starting salaries of around $80-$100 per month. Job vacancies often attract applications from hundreds, if not thousands, of well-trained Indonesians. Salaries in general remain low, while living costs continue to increase. The issue is how to generate prosperity at the private-sector level in order to increase the capacity of companies to provide more sufficient in the workforce sector.

In this context, it is appropriate to address the question of why Indonesian business in general failed to expand national prosperity during periods of double-digit growth. In this matter, the short-term perspective of many Indonesian industries resulted in a lack of resources that being used for the investment in the future.

There are still today very few Indonesian companies that enable to securing a leading edge in the future. Little investment is devoted to research and development and the focus on marketing remains insufficient. Large sectors of the Indonesian economy continue to compete on high-volume, but low-margin products. For example, while the textile industry remains very active internationally large sectors of the Indonesian industry continue to compete in relatively low-value segments of the market.

In many cases, Indonesian companies are producing goods with very low margin value. Footwear is another example where Indonesian industry is hard pressed to even cover labor costs, let alone generate the funds to contribute to the social and welfare fabric of the nation. If anything, the competition now unleashed in the global economy is making the situation much worse. Where Indonesian industry does not possess a comparative advantage in raw materials, we are forced to try to keep labor costs at a minimum in order to compete globally.

At the same time, the lowering of tariffs is unleashing competition on the domestic market. As a result, Indonesian industry is under intense competitive pressure. A number of measures can be taken to try to improve wealth generation. In specific eases, the government of Indonesia may encourage the development of research and development or improved marketing skills in certain sectors or encourage investment in sectors with more value.

In other cases, we may wish to encourage investment in those sectors where Indonesia possesses a comparative advantage other than simply cheap labor costs. Development of our own fishery and agricultural resources is an obvious example. Woodworking and furniture and the paper and pulp industries are also important. Indonesia also have to improve their education standards to be able to compete with the foreign invasion.

Such initiatives are unlikely to succeed without the general commitment of the international community. Unless markets are opened to Indonesian products in general, it is unlikely that Indonesia can generate the wealth to be able to establish an effective social and welfare system that would support good business ethics in our society.

Indonesia has increasingly opened its markets to foreign competition. There is no doubt that the other country help in the market has improved efficiencies within the Indonesian economy. The process may, however, also have reduced the ability of the nation to generate income for social needs.

The positions of conglomerates and state enterprises are being challenged and their ability to meet social and welfare objectives for their employees is increasingly being threatened. While, on balance, the opening of the Indonesian market is irreversible as part of the process of globalization, it should be stressed clearly that good business ethics in Indonesia will not just emerge on the basis of strengthening laws and accounting principles.

Such ethics can only be supported through the generation of wealth. The private sector in Indonesia should not just be considering the bottom line of profit or maintaining favorable labor costs but should also accept responsibility for improving social and welfare conditions.

To do so, it must be able to generate the income required. Access to foreign markets is therefore of crucial importance and lack of market access will not provide the wealth needed for Indonesia to institute favorable social and welfare conditions

I do hope that one day, the world will see Indonesia not as a source of cheap labor anymore, but because of their skilled workers. And, Indonesia will have their own international brand that can penetrate the international market and compete with the big companies out there.