Indonesia is currently facing a critical economic issue that has persisted for decades, which is the persistent outflow of national wealth. A significant portion of the country’s generated economic wealth is stored and utilized overseas, leading to a condition where Indonesia is financially hemorrhaging. This issue can be traced back to the colonial period, where Indonesia’s wealth was being drained out of the country, similar to what is happening now but in a subtler manner.
During the Dutch East India Company (VOC) era, the outward flow of wealth was evident, leading to challenges from the Generation of ’45. The situation today is reminiscent of the past, with economic indicators showing how Indonesia’s wealth is being drained abroad. The trade balance, ownership structures of exporting companies, deposits in foreign banks, and earnings kept overseas by foreign companies operating in Indonesia all contribute to this wealth outflow.
An analysis of Indonesia’s export-import ledgers from 1997 to 2014 revealed that the total exports reported were substantial but might not accurately reflect the actual value of exports. Export leakages due to trade misinvoicing were estimated to be significant, further exacerbating the issue. It was found that profits earned from exports were not staying domestically, with Indonesian entrepreneurs and companies parking a significant amount of money overseas.
The majority of Indonesia’s export profits were found to go to foreign companies with accounts abroad, highlighting the issue of wealth not remaining in the country to stimulate the economy. This problem of wealth outflow is not new and has been persistent for centuries, as highlighted by historical figures like Sukarno. The need to address this systemic issue and repatriate wealth back to Indonesia to build the country and stimulate the economy is crucial.
The lack of transparency from Indonesian elites in addressing this issue and the increasing marginalization of the poor while the rich get richer point to a severe wealth outflow problem that needs to be tackled. The call for repatriating funds parked abroad and utilizing them for the country’s development is essential to ensure a more prosperous future for Indonesia.
