People Innovation Excellence

THE COMPETITIVE ADVANTAGE OF INDONESIA

The Competitive Advantage of Nations, 1990 put forward by Michael E. Porter is about the absence of a direct correlation between the two factors of production (natural resources high and low human resource) owned by the state to be utilized as a competitive advantage in trade.

Porter revealed that there are four main attributes that determine why certain industry in a country can achieve international success:

a. Conditions of production factors (factor conditions), is the position of a State in the factors of production (e.g. skilled labor, infrastructure, and technology) needed to compete in a particular industry.

b. Demand conditions (demand conditions), is the nature of the domestic demand for products or services of a particular industry.

c. Industry related and supporting industries (related and supporting industries), is the presence or absence of industry suppliers and “industry-related” which internationally competitive in that State.

d. Strategy, structure and competition of companies, is the domestic conditions that determine how companies are formed, organized and managed as well as the nature of domestic competition.

These factors, both individually and as a system, are creating a context in which firms in a country are formed and compete. The availability of resources and skills needed to create a competitive advantage in an industry information that forms what opportunities are perceived and the direction where the source and power and skills are allocated, the purpose of the owners, managers, and employees involved in or conducting competitions, and much more important, the pressure on companies to innovate and invest.

What makes Indonesia competitive compared with other countries? It’s because Indonesia is a country that rich in natural resources. For instance, in the field of fisheries. Indonesia is an archipelago (archipelagic state) the largest in the world with as many as 17,504 pieces islands and long coastline of 104,000 km (‘Bakosurtanal’, 2006). The total area of the Indonesia Ocean is approximately 3,544 million km2 (Maritime Affairs and Fisheries in Figures 2010), or about 70% of the territory of Indonesia. The state should put the fisheries sector to be one of the potential of the real sector in Indonesia. The economic potential of resources in the fisheries sector is estimated to reach US $ 82 billion per year. This potential includes: fishery potential of US $ 15.1 billion per year, the potential for marine aquaculture amounted to US $ 46.7 billion per year, the potential for aquaculture of US $ 1.1 billion per year, the potential for aquaculture $ 10 billion per year, the potential for freshwater aquaculture amounted to US $ 5.2 billion per year, and the potential for marine biotechnology at US $ 4 billion per year. In addition, other potential can be managed, such resources are not renewable, and so it can make a significant contribution to the development of Indonesia.

The second example being that Indonesia has its own advantage and not shared by other country, is of the tourism sector. Minister of Tourism and Creative Economy, Mari Elka Pangestu said Indonesia has superior competitiveness in the tourism sector in comparison to the Philippines, Vietnam and Cambodia. He said Indonesia’s competitiveness had improved in 2013, up to rank 70 of the previous 74 in 2011, based on data from the World Economic Forum. “The strength of Indonesia is located on the cultural resources and natural resources, as an asset that we can promote”. Indonesia’s competitiveness in the natural resources occupies the 6th position in the world, while the cultural resources rank 30 out of approximately 130 countries in the ranking of the World Economic Forum. She also said that Indonesia also has a strong position in price competition in the tourism sector. She said Indonesia ranks ninth in the level of price competition between countries in the world in the field of tourism.​

However, Mari said Indonesia needs to do a great improvement in the field of tourist support infrastructure. She says the lack of tourism infrastructure, ground transportation, air transportation, and infrastructure of information and communication technology (ICT) into the work that must be done immediately. She said the level of health and hygiene also occupies the lowest position in the ranking of competitiveness in the world.


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  1. Written By: Selly Novela, ST, MM – IBM

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