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The Form of Economic Globalization and Its Effect on the Indonesian Economy – What are the forms of economic globalization in Indonesia? and what are the effects on the Indonesian economy? – In at least the last century, the world has been hit hard by the currents of globalization. The rapid development of technology is suspected as one of the causes of this borderless world phenomenon.

The flow of globalization is increasingly unstoppable, flooding all fields, including the economy. Economic globalization has various forms and various effects. We as citizens of the world are “required” to understand and be aware of it. What is it like? Read more in the article below!

A. Definition of Economic Globalization

The Form of Economic Globalization and Its Effect on the Indonesian Economy

However, before discussing it further, let’s first equate perceptions of globalization and economic globalization. The Big Indonesian Dictionary (KBBI) defines globalization as the process of entering the world. In a shorter language, this absorption from the English vocabulary globalization can also be interpreted as worldwide.

Literally, globalization can be interpreted as the process of something becoming global. “Thing” here can be in the form of technology, thoughts, information, and people’s lifestyles.

According to Professor Selo Soemardjan—a professor in the field of sociology—globalization is a process of building a system of organization and communication among the world’s people to comply with the same system and various rules.

Globalization has a characteristic, namely, changes in the form of technological development and progress, the emergence of interdependence between countries related to economic production and markets, common problems—the countries of the world—increase, as well as cultural exchanges and interactions between world citizens.

The term globalization has actually started to be used by the world community since the 19th century. However, at that time the word used was globalize, which referred to the emergence of a network of economic and social systems on an international scale.

The term ‘globalization’ itself was first used in 1983 by Theodore Levitt, an economist. Levitt coined the term ‘globalization’ through his writings in the form of an article entitled Globalization of Markets which was published in the Harvard Business Review media. Since then Levitt is recognized worldwide as the creator of the term ‘globalization’.

Globalization has now occurred in all areas of life, the economy is one of them, so the concept of economic globalization emerged. The economic sector is indeed a field that is easily and quickly hit by the flow of globalization. This is because the needs of economies around the world tend to be the same and uniform.

However, the economy is not the only sector affected by globalization. According to the Head of Research at the Global Cities Institute from RMIT University who is also a Lecturer in Global Studies, Manfred Steger, there are four main empirical dimensions of globalization, namely, economics, ecology, culture, and politics.

Recently, there is one additional dimension and it becomes the fifth dimension of globalization, namely ideology. This fifth dimension crosses the other four dimensions. Why is that? Because according to Steger, the ideological dimension is full of a set of norms, beliefs, claims, and explanations about the phenomenon of globalization itself.

Back to globalization in the economic field. What is the true meaning of economic globalization? The phenomenon of economic assimilation and the emergence of economic dependence among nations—both at the local, regional, and even national levels—through the intensive movement of technology products, goods, services, and capital, is the definition of economic globalization.

Globalization in the current economic sector arises because of the rapid development of information in all activities of a production, marketing, and science and technology nature.

In simpler language, economic globalization puts the world into one unit, the goal is to build a commercial area that is broad and transcends national boundaries.

Economic globalization is also closely related to the phenomenon of free trade which seeks to remove various barriers to the trade process in the international arena. A series of obstacles are usually caused by export and or import tariffs that are too high, causing the prices of goods to no longer compete in a healthy manner.

Other obstacles can also take the form of politics in trade adopted by a country. The political aim is none other than to protect the production process in the country. Based on the theory, free trade rejects these various barriers.

Many people may be confused and wonder, has economic globalization occurred in the world, especially in Indonesia? To answer this question, there are several characteristics of economic globalization, namely:

  • Technology is developing so rapidly, even across space and time.
  • The existence of technological products such as satellite, television, mobile phones, and especially the internet, has succeeded in creating a communication process in a global scope capable of taking place very quickly.
  • Global problems that attract the attention of the whole world are also increasing in intensity, for example, crises that are multinational in nature, regional regulations, and the most attention now is on the environment.
  • The emergence of dependence on economic production and markets in world countries caused by global trade
    The occurrence of interactions that are cultural and cross-cultural between citizens of the world who ask about various new things.

In Indonesia itself, the constitution that has existed since the beginning puts more emphasis on a planned economy which is clearly recorded in the Preamble to the 1945 Constitution. Learn about the national economic system, globalization, constitutional economics and the economics prize in the book Globalization, Constitutional Economics, and the Nobel Economics.

B. Real Forms of Economic Globalization

Although it cannot be sensed directly, economic globalization has a tangible form that can be felt. This is because the phenomenon has a characteristic that makes it easy to identify. For example, there is a relationship that is cultural because of the emergence of dependence in the global market.

Is a well-known entrepreneur in Indonesia, Dr. Tanri Abeng, S.E., M.B.A., who sparked the idea of five forms of economic globalization. Apart from being an economic actor in his status as an entrepreneur, Tanri Abeng has also sat in the ranks of policy makers in the VII Development Cabinet and the Development Reform Cabinet, holding the position of State Minister for the Utilization of BUMN. He also served as President Commissioner of Pertamina.

With this capacity, here are Tanri Abeng’s ideas about some concrete forms of economic globalization:

1. Globalization of Production

The form of globalization of production is the existence of one or more companies setting up factories in many countries. This is done with the aim of minimizing production costs.

The countries chosen are usually countries that have low wage rates. In addition, the import duty rates imposed by these countries are also cheap.

Furthermore, the infrastructure in the country is adequate to carry out production. Finally, the business climate in the destination country is also conducive to the company’s production activities.

Companies that often do globalization of production are usually those who are engaged in the manufacturing industry. Indonesia has also become one of the destination countries for the globalization of this production. In the last few decades, many world-class manufacturing companies have flocked to set up factories in Indonesia.

2. Globalization of Financing

Globalization of production can be done because of the globalization of financing, namely, loan facilities that can be obtained by international-class companies in all countries in the world.

In addition to loans, global companies can also get facilities to carry out investments. This globalization of financing then allows international companies to produce and invest in many countries.

3. Globalization of Workforce

This globalization phenomenon which has recently become a topic of conversation in this country, both in cyberspace and in coffee. The entry of foreign workers into a country is a sign of the globalization of this workforce.

In this case, global companies are very likely to use human resources from many countries in the world. The workforce used is also in accordance with the level.

But unfortunately, this also opens up opportunities for the company to use the services of an internationally experienced HR. Meanwhile, the majority of workers from developing countries or countries where they are produced will only be used as laborers with menial jobs.

4. Globalization of Information Networks

The phenomenon of the borderless world is evident in the globalization of this information network. People everywhere today can quickly, easily, and cheaply access information from around the world.

Technological advances are thought to be the main cause of the emergence of this phenomenon, especially information and communication technology. In the end, this technological advancement is used by global companies to market their products throughout the world.

The entry of well-known international brands in the fashion and culinary fields eventually became a global taste. This is what is currently being felt in Indonesia. Even not only in urban areas, people in rural areas feel more proud to wear or consume international brands rather than local products.

5 Trade Globalization

This phenomenon is the ultimate form of economic globalization. Trade globalization is realized by the existence of uniform tariffs.

In fact, it is not uncommon for countries in the world to lower their export and import tariffs and remove various non-tariff barriers. This is done so that global trade becomes faster, fairer, but at the same time tight competition.

With the rapid pace of global trade, there are more and more issues regarding IPR, law violations in E-Commerce, electronic contracts, consumer protection in cyberspace, and various other issues that occur. Learn it all in the book The Effect of the Globalization Era on Business Law in Indonesia.

C. Effects and Impacts of Economic Globalization on a Country

After examining the understanding of the forms of economic globalization above, of course this phenomenon has a significant influence and impact on a country. Like two sides of a coin, economic globalization has a positive and beneficial impact, but at the same time a negative and detrimental impact cannot be avoided.

1. Positive Impact of Economic Globalization

The existence of a global company that spreads its wings throughout the world is of course a breath of fresh air for the economy, especially for developing countries. Indonesia is no exception. This is a blessing in itself to be grateful for, but at the same time we must remain vigilant.

Here are some of the positive impacts of economic globalization in more detail:

  1. Economic globalization is able to stimulate economic growth in destination countries—the majority of which are developing countries, our country also feels it
  2. Economic globalization makes investment mechanisms and opportunities more open in the international arena
    Economic globalization encourages the world economy to continue to grow. Not only partial and sectoral, the world economy is growing as a whole. This is due to an industry whose location has changed so as to encourage efficiency
  3. Increased income in developing countries as a result of free international trade is also a positive impact of economic globalization. This increase in income will ultimately be able to reduce poverty in the world
  4. Still related to the points above, the increasing income of developing countries due to global trade in turn is able to make per capita income also increase on a global scale.
  5. Economic globalization makes the variety of goods and services in one country increase in variety. This is due to the large number of offers of various goods and services by many countries, so that the variations are
  6. becoming more and more in the global market. This increasing variation also results in the fulfillment of the needs of the population in one country
  7. Finally, economic globalization makes a country able to compete in the global market more efficiently.

2. Negative Impacts of Economic Globalization

As mentioned above, economic globalization in addition to having a positive impact, at the same time also has a negative impact. Therefore every country must increase vigilance in order to face the negative impact of this economic globalization.

The following are some of the negative impacts of economic globalization:

  1. Economic globalization causes the economic adjustment process in a country to be ineffective.
  2. This is due to the flexibility that the country must have as a demand when it wants to engage in global trade
  3. Economic globalization has also resulted in an increase in economic conditions that are unstable and sensitive to various events, such as the occurrence of war and terrorism in a country
  4. Economic globalization triggers environmental damage. This is due to the increasing number of parties carrying out industrial activities, from production to consumption
  5. Economic globalization causes unequal per capita income between developing and developed countries
    Still related to the points above, the income gap does not only occur between countries. The gap can also occur within the scope of a country.
  6. This is due to the unequal distribution of areas that are directly impacted by globalization. Urban areas usually earn more than rural areas because they also have greater access to global trade. This inequality is a risk that cannot be avoided, although on the other hand globalization has a real impact on the economy as a whole
    Economic globalization has resulted in lower levels of job security. This is the impact of the wider scope of the market, so that security when transacting or carrying out work becomes difficult to ensure.

D. The Effect of Economic Globalization on the Indonesian Economy

As a world resident, Indonesia cannot escape the effects of economic globalization. In Indonesia, there are at least four kinds of sectors that are directly affected by economic globalization. The four sectors are labor, investment, exports and imports. As mentioned above, the perceived impact can be positive as well as negative.

In addition to the four sectors above, the phenomenon of globalization is also able to make changes in the behavior of economic actors towards the production process. The more efficient and intensive use of production factors is the impact of these changes.

The positive effects of economic globalization that can be felt in this country are the increasing frequency of investment and trade, as well as the increasingly competitive industry at the national level. Again, like two sides of a coin, negative influences must be borne. The national industry which is increasingly full of competition has resulted in the destruction of comfort among the people.

In addition, economic globalization has caused many people to abandon traditional economic sectors. They migrated in droves to a more modern sector of the economy. As a result, many traditional markets are now quieter. Therefore, in maintaining the traditional market, the book Managing Cultural Conservation, Caring for Civilization by the Editorial Team is here to answer this.

Thus, economic globalization is a necessity, an unavoidable phenomenon. This is a consequence of being a citizen of the world. However, we need to remember, Indonesia also has noble cultural roots that should not be abandoned.

Being global is indeed important and even a demand, but local wisdom should also be held firmly. Think global, act local. Once again, it is important to be global to show our existence as citizens of the world, but don’t let our identity as an Indonesian nation erode because of it.

E. Economic Globalization Book Recommendation

1. The Influence of the Globalization Era on Business Law in Indonesia

2. Indonesian Economic Politics

3. Monetary Economics: A Case Study of Indonesia

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