Tue, 15 Sep 2009
Just a decade ago Indonesia was on the brink of catastrophe. Things have taken a dramatic turn for the better, says Simon Long (interviewed here)

COUNTRIES generally hit the headlines only when the news is bad. In Indonesia it has often been spectacularly bad. A decade ago there were fears that the country might disintegrate in a welter of violence, piracy and mass migration. Its former dictator, Suharto, set new standards for kleptocracy. As he fell in 1998, the economy collapsed. The Bali bombing of 2002 that killed more than 200 people was one of a series of such attacks, and the lingering danger of Islamic terrorism was recalled by another murderous blast in Jakarta in July this year. The country is prone to natural disasters too, from the tsunami that devastated parts of Sumatra in 2004 to this month’s deadly earthquake in Java.

So Indonesia has an image problem. Foreigners may not realise, its boosters defensively suggest, that the world’s third-largest democracy and fourth most populous country, with more Muslims than any other, is actually doing rather well. It enjoys political stability under a popular incumbent president, Susilo Bambang Yudhoyono (pictured above). The bombing in Jakarta was the first such atrocity for nearly four years. Economic growth has slowed, but the country has withstood the global slump well. Of big countries, only China and India are growing faster.

It still has enormous problems. Separatist tensions have eased, but it remains prone to sectarian and ethnic violence. Mr Yudhoyono has not met his promise in 2004 of halving the number of people living below the government’s poverty line. More than 15% of Indonesia’s 240m people are poor. Unemployment is high, at about 8%, and the workforce is growing faster than in any other country apart from India and China. Inequality has actually widened a little. Those who looted the country under Suharto, and the soldiers who connived at terrible abuses, have enjoyed almost total impunity. Indonesia is still one of the world’s most corrupt countries. Its infrastructure is in woeful shape. And as another El Nio weather pattern takes hold, choking smog caused by forest fires is already smothering parts of Sumatra, drawing attention to Indonesia’s role as the world’s third-largest emitter of carbon.

Causes for hope

There are, however, four big reasons for optimism. The first is demographic. Over the next few years, thanks to a combination of a young population and a falling birth rate, Indonesia will see a surge in the ratio of its working population to the number of dependants. Next year, for the first time, more than half the population is likely to be living in urban areas, implying a further boost to consumption, the country’s main source of economic growth.

Second, fiscal restraint in recent years has left the government with the resources to spend more on Indonesia’s deficient infrastructure and public services. Having withstood the slump of the past year remarkably well, Indonesia is well placed to maintain solid growth rates for years to come. Considered a basket-case not so long ago, it is now seen as an extra “I” in the BRIC group of big, fast-growing emerging markets (Brazil, Russia, India and China).

Third, Mr Yudhoyono’s re-election in July gives him a mandate for the reforms Indonesia needs. His victory probably owed much to his reputation as a doughty warrior against corruption, and to his policy of giving cash handouts to the poor. In the election campaign he and his running-mate, Boediono, a well-respected former central-bank governor, were attacked as “neo-liberals” by opponents playing the card of anti-foreign economic nationalism, but many voters simply seem to have shrugged this off.

And that leads to the fourth reason for optimism. Despite serious flaws in the electoral system and in the mishmash of parliamentary and presidential constitutions Indonesia has designed for itself, it seems likely to enjoy a period of political stability. Democratisation has been a mess, and much needs fixing. But Mr Yudhoyono now has the breathing-space to try.



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