Jim O'Neill: Mint or Bric? Indonesia's drive is impressive as Russia's future dims
Economic View: Indonesians have a healthy preoccupation with the country's prospects
Friday 15 November 2013
I spent last week in Indonesia, working on a series for BBC Radio about four of the world's most populous non-Bric emerging economies. The Bric countries – Brazil, Russia, India and China – are already closely watched. The group I'm studying for this project – let's call them the Mint economies – deserve no less attention. Mexico, Indonesia, Nigeria and Turkey all have very favourable demographics for at least the next 20 years, and their economic prospects are interesting.
Policymakers and thinkers in the Mint countries have often asked me why I left them out of that first classification. Indonesians made the point with particular force. Over the years, I've become accustomed to being told that the Bric countries should have been the Briics all along, or maybe even the Biics. Wasn't Indonesia's economic potential more compelling than Russia's? Despite the size of its relatively young population (a tremendous asset), I thought it unlikely that Indonesia would do enough on the economic-policy front to quickly realise that potential.
Now, meeting a diverse group of Indonesians – from the leading candidates for the 2014 presidential elections to shoppers in Jakarta's busy malls – I found a healthy preoccupation with the country's economic prospects. Could Indonesia do what's needed to lift the country's growth rate to 7 per cent or more, they were asking, or would it have to settle for "just" 5 per cent?
During the trip, I got word that Russia's Economy Minister, Alexei Ulyukayev, had suggested Russia was likely to grow by just 2.5 per cent a year over the next 20 years. How's that for contrasting ambitions? It made me wonder about the "R" all over again.
Certainly if Russia can only grow by 2.5 per cent this decade and beyond – far too little to maintain, let alone increase, its share of global output – that would be cause for concern. Not least because the country faces a growing demographic challenge as it moves toward 2050.
By that year, I and many others assume Russia's population will be closer to 100 million than today's 140 million. This worsening demographic drag will slow the economy further.
Russia's recent economic performance has undoubtedly been poor, and demography isn't the only problem. The country is far too dependent on oil and gas, afflicted with corruption, and lacking a credible legal framework for business. Even so, one wonders about the thinking behind Mr Ulyukayev's public pessimism. Until recently, Russian officials were determinedly upbeat. I recall in 2008 telling a group in St Petersburg that Russia would probably grow at 4 per cent a year or less through 2020, and that it was a mistake to assume ever-rising oil prices. As they made very clear, that wasn't what they wanted to hear. I suspect the new pessimism may be deliberately exaggerated. Maybe some influential policymakers are trying to build support for genuine reform by asking, see what happens if we don't act? Let's hope so.
Last week also saw the build-up to the much-anticipated meeting of China's leaders that began over the weekend. As I discuss in a new book, The Bric Road to Growth, China has a unique role in the group, not just because of its size but also because of its global economic reach and ambition. Nonetheless, its approach to development needs to be adjusted. Reports suggest that the government is considering new steps to create a more consumer-led economy, which is indeed necessary to lessen China's dependence on low-value exports and state-directed investment.
That will be a difficult transition to manage, but, by emerging-economy standards, China's leadership has a history of clear thinking about economic strategy – not to mention an unmatched record of success. The policy review coincides with new figures that continue to be somewhat better than expected. China is likely to grow by more than 7.5 per cent this year. If so, it will have beaten my expectations for growth since the start of this decade, the only Bric country to have done so.
By the end of this year, China's annual output will be more than $9trn – not far off 1.5 times the output of the other three Bric countries put together. If its leaders can deliver the reforms they've been discussing since the weekend, the country's rapid growth can be sustained. The global economy will continue to be transformed, and the other Bric and Mint economies will have an even more daunting standard against which to measure their performance.
Jim O'Neill, former chairman of Goldman Sachs Asset Management, is a Bloomberg View columnist. ©Bloomberg News
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