Long‐term forecasting of technology and economic growth in Indonesia

Summary This paper attempts to analyze the importance of technology investment strategy and its effects in influencing economic growth under the economic complexity of Indonesia. The model of economic dynamics through innovation is applied to understand the behaviors of economic growth, investment, and consumption. The results of a computer simulation show: (i) economic growth can occur under the conditions of investment growth and investment reduction, while it generally occurs under the condition of consumption growth; (ii) the fluctuation of economic growth can be stabilized by technology investment; (iii) the initial condition of technology investment determines the stability of economic growth; and (iv) constant growth of technology investment will secure the stability of economic growth in the long run. The model concludes that a commitment to maintain technology investment in the private sector is important for a stable economic growth in Indonesia. More specifically, the choice of optimum technology investment strategy for increasing competitiveness of Indonesian companies is a robust strategy in the long run.