Australia has a lot of things, but what it doesn’t have is a lot of people.
And while that may be one of the reasons many of us like to live here – clean, open spaces and all that – it does put us at a disadvantage in uncertain economic times.
Take our nearest neighbour, Indonesia. A country of 210 million, it boasts a population 10 times bigger than our own. Jakarta itself has a population of more than seven million and that’s just one of more than a dozen major cities in the Muslim nation.
Rather than these hordes of people being a drain on the economy, they actually help propel it forward. Essentially because of the nation’s ability to self-generate.
While it is true that Indonesia is not dissimilarly affected by the restricted global access to finance and the ability of trading partners to spend, they are more capable of generating an economy from within.
Take just one area, that of energy. In Indonesia, there is a significant deficit of supply in relation to demand for power to the point that if you go out of the major cities there is very little, if any. And while affordability has some part to play in this, it is mostly to do with a lack of supply.
The demand for electricity is expected to go up to 250 million barrel of oil equivalents by 2025 – more than tripling today’s 80 million BOE.
With electricity just one example of what this huge economy is demanding from within, Indonesia clearly has a greater capacity to sustain itself.
It is also worth noting that the nation went through its banking sector pain back in 1997, when inflation was briefly 65 percent, and most of the banks were then nationalised.
Boasting the world’s biggest Muslim population, Indonesia also has a very different way of doing business that has stood it in good stead.
The Islam way is not to go into debt so much as to encourage business partners. This is reflected in the financial system for instance via the Islamic bond, which looks like a very good business tool in today’s uncertain environment.
Essentially, you can’t make money from money, so rather than charging interest you get your returns by another way, usually through an equity interest or equity interest equivalent. This type of instrument may encourage a greater emphasis on partnerships whereby investors take a more longer term view.
Now, I’m not suggesting all Indonesia is covered by Islamic bonds, but if you take them as an indication of how Muslims prefer to do business it is yet another reason why somewhere like Indonesia is in a pretty good position, comparatively speaking. It is not, like so many of its trading partners, debt ridden.
While many economies are reeling, the likes of Indonesia and China still have GDP growth, at 6 percent and 8 percent respectively, that would be the envy of the Western world. Australia’s GDP contracted in the last quarter.
These big, albeit developing, nations appear to be in a much better position to outride the economic stormfront. And it has a lot to do with having lots of people.
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