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Indonesia among nations leading rise of powerhouse Asia: ADB report

Indonesia is among seven Asian nations that will lead the regiona��s rise to become a powerhouse that controls half of the worlda��s economy and output, the Asian Development Bank (ADB) says.

In its latest report released Wednesday, the ADB cited China, Japan, India, Indonesia, Malaysia, South Korea and Thailand as the potential drivers of Asiaa��s rise over the next 40 years, when three billion Asians could enjoy higher living standards compared to those of Europe, the United States and other developed nations.

In 2010, the seven economies had a combined total population of 3.1 billion, or 78 percent of Asia, and a gross domestic product (GDP) of US$14.2 trillion.

Indonesiaa��s economy, the largest in Southeast Asia, stood at Rp 6,422.9 trillion ($751.48 billion) in 2010, growing at a pace of 6.1 percent throughout the year, one of Asiaa��s a�� and the worlda��s a�� fastest growing countries.

Under the ADBa��s a�?Asian Centurya�? plan, the regiona��s GDP is expected to soar to $148 trillion and account for 51 percent of global output in 2050. On a purchasing parity basis, GDP per capita in Asia would rise to $38,600, compared with the projected 2050 global average of $36,600, the ADB said.

a�?Being the 18th largest economy in the world and one of the fastest growing in Asia, Indonesia has the potential to contribute to Asiaa��s economic growth, which will be the engine of global growth in the next 20 years,a�? Standard Chartered Bank Indonesia senior economist Fauzi Ichsan told The Jakarta Post.

Indonesiaa��s economy is expected to reach $4.7 trillion by 2025, according to President Susilo Bambang Yudhoyonoa��s administrationa��s economic master plan, which involves investment in six economic corridors or clusters throughout the archipelago worth up to $4 trillion.

a�?Indonesia has laid out great plans, but at this point ita��s a matter of how to implement the plan. Ita��s always an infrastructure story here,a�? CIMB Niaga economist Andry Asmoro told the Post.

Economists, including Vice President Boediono, have said that infrastructure bottlenecks remain the most impeding factor for the countrya��s economy to achieve its optimal growth of up to 8 percent.

a�?We have to seriously fix the infrastructure issues. Indonesia is facing an election in 2014 and we are concerned that the development programs that have been laid out by the current administration will be forgotten,a�? Andry said.

Fauzi agreed, saying the amount of Indonesiaa��s contribution to Asia will depend on a�?how fast Indonesia builds its infrastructure, which can accelerate GDP growth to its 8 to 9 percent potentiala�?.

As for the ADB, governance and institution building are the a�?great challengesa�? for the region to boost its economy.

a�?Governance and institution building need to be modernized to ensure transparency, accountability and enforceability of rules and regulations.a�?

If Indonesia and other Asian countries fail in solving these issues, they would fall into the a�?middle income trapa�? scenario, which assumes that Asiaa��s fast growing economies a�� China, India, Indonesia and Vietnam a�� will fall into a trap of slowing growth rates and stagnating income levels over the next five to 10 years, ADB said.

a�?If these events occur, Asia would account for only 32 percent, or $61 trillion, of global GDP in 2050. On a purchasing power parity basis, GDP per capita would rise to only $20,300, or just over half of that under the a�?Asian Centurya�� scenario,a�? the Bank said.