A resilient nation looks forward to strong growth in the economy after weathering the south-east Asian financial crisis
uch
has changed in Indonesia in recent years. After the financial crisis
that rocked the whole of the Southeast Asian region in 1997, causing
problems in the banking system and denting economic prospects, there
is hope that the corner has been turned. Investor confidence is returning,
business is picking up and growth is accelerating.
In 2003, GDP growth reached 4 per cent, up on 3.7 per cent a year earlier. After the negative growth in the wake of the crisis, this is quite impressive and the upward trend is expected to continue in 2004. Analysts are increasingly confident about the country’s prospects.
It is a reflection on the achievements of the government in Jakarta, the capital. In the years since 1997, it has led a massive reform of the financial system and virtually every other part of the economy. Indonesia has come a long way in a short time.
Devolution of power to the provinces is reinforcing local commitment
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Quite a few useful lessons have been learned. Indonesian Vice President Hamzah Haz says that it is essential to maintain the momentum. He predicts GDP growth of 4.5 per cent for this year. “We can see from these rates that Indonesia has successfully emerged from the economic crisis,” he says.
The
Bali bombing in 2002, followed by the Marriott Hotel blast in Jakarta
last year, put Indonesia in the spotlight for all the wrong reasons.
But the tourism sector is starting to recover and other industries are
riding high. In
the oil and gas sector, for example, the country is well placed to supply
the growing needs of China, which faces an increasing energy deficit,
and Japan, the world’s second-largest economy. The development
of liquefied natural gas in Indonesia is providing greater stability
to the hydrocarbons sector. Other areas, such as transport and communications,
are experiencing sustained growth again as investment returns.
This turnaround illustrates the resilience of the economy and the resolve of the people. “The Indonesian people’s confidence is still strong,” insists Mr Haz. After the ups and downs of recent years, the whole population, of approximately 240 million, have made great efforts to achieve progress.
Indeed, a key element of the government’s new strategy is the devolution of power to the provinces and districts, giving local communities a voice in policy making. The enactment of new laws promoting decentralisation away from Jakarta to the scattered islands is having a profound impact not only on the way things are done but also on the psyche of the people. In a land of so many different cultures and languages, embracing diversity is the best way forward. The advent of regional autonomy needs to be carefully handled though. Mr Haz says some areas must still come under the control of the centre. “A degree of special expertise at the national level is needed to handle foreign investment,” he says.
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Security is another major issue facing the government following the recent attacks. But the return of tourists to the country and the acceleration of investment suggests that there is confidence in the counter-terrorism measures that the government is taking. The Jakarta stock market performed better than most in the region in 2003. It climbed 691.9 points, the highest level for three years.
The British influence here is strong. The UK is the second-largest foreign investor in the country, with extensive interests in the energy sector, led by BP and BG Group. There is ongoing dialogue in political, social and cultural circles, as well as extensive co-operation in the security field.
National politics are certain to feature prominently on the news agenda this year with elections scheduled for July. Minister of Communication and Information Syamsul Mu’arif says Indonesia is learning from the successes and mistakes of other Asian countries. While certain states such as Malaysia, Singapore and China have achieved substantial economic gains, political reform is slow. A better model is South Korea, where the two have gone hand in hand.
“Indonesia wishes to follow a model that allows the development of democratisation and economic recovery to be achieved simultaneously,” says Mr Mu’arif.
Again, the gradual devolution and decentralisation process is reinforcing political reform, generating greater responsibility among local leadership and nurturing economic advances. The move is already reducing red tape and facilitating business access for investors.
Although Indonesia still faces numerous challenges, substantial progress has been made. The banking sector is on a firmer footing, currency and interest rates are more stable and businesses are starting to look ahead. Improvements to the country’s infrastructure are also expected to encourage the return of investors. This is a crucial year for Indonesia and its people, but perhaps, at last, the wind is blowing in the right direction.
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