Asia’s Week: ‘Fragile’ Indonesia Stays Cool in the Shadows

03-Mar-2014 Intellasia | Forbes | 6:00 AM Print This Post

Maybe lying low in Asia this week was the better part of valor. China and Thailand occupied much of the coverage, and not for happy reasons as concerns grew over their near-term prospects. India was increasingly focused on a political upheaval that may soon follow sorry GDP growth news.

So therefore Indonesia had reason to celebrate. Like India, it had not long ago been consigned to a “fragile five” emerging nations at risk of debt and other “imbalance” exposure to the infamous Fed taper (or end of insanely loose global money). As tightening occurs, these economies are or were thought prone to have “hot money” disappear and contraction set in. The Indian central bank is waging its own struggle to extricate the country even ahead of spring elections, but Indonesia has managed to escape the intense heat with less fanfare. Surely the rupiah currency has regained some strength, the business press is taking a breather as exports stay healthy and there isn’t quite the desperate hoping over Indonesia’s own spring ballot.

Indeed, the contest to succeed the generally benign if hardly sublime rule of Susilo Bambang Yudhoyono (SBY) as head of state is not an easy one for outsiders to follow. As the Financial Times laid it out this week, it’s first a parliamentary vote to establish which parties have enough support to qualify a bid for president, in a ballot that soon follows. But in the run-up, there’s jockeying for who can get the party nods, especially for the would-be heirs among SBY’s Democrats. In departing after 10 years, the president seems to want a practiced national manager with political skills. Other parties’ top prospects have more of a charismatic or martial flair.

In the general appeals to domestic interests that any campaign invites, it’s unlikely that bold economic reforms – that is, to open up to freer trade and other spurs to competition and productivity – will figure highly in anyone’s platform. About the most that a prudent World Bank economist in Jakarta can hope is that recent retreats by the government toward resource protectionism and other wall building will not be worsened too much by promises on the stump, and the country after the vote can revert to one of its periodic stretches of liberalisation.

It’s probably helpful that Indonesia has grown into membership in the fraternity of modern economies, the G-20 (or as I call it, the G19 + Argentina), and that this together with other, regional affiliations will nudge Jakarta toward multilateralism. Credit a sort of bureaucratic momentum and the need to sign onto those obligatory communiques. Plus as Indonesia steadily develops real businesses that compete in international channels and don’t just rely on crony-capitalism at home, they will put useful pressure on the political class. But distractions will not go away. There will be always be some showy offense to be taken at Australia or some drum-beater like John Kerry coming to town to score points against climate change. Indonesia and its 18,000 islands obviously are at the whim of nature but what its economic heart most needs is the solid infrastructure that wealth and honest administration can produce.

In getting there, the nation could use more weeks like the last few, with only so-much-attention-and-no-more being drawn to its predicament and promise.


Category: FinanceAsia

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