So far, Indonesia has weathered the global economic down turn better than many nations in Asia. The government is projecting GDP to grow by 4 and a half percent this year, more than most of its ASEAN partners.
And according to foreign investors in the country there is reason to be optimistic about its future growth. A recent survey by the banking and insurance group ING ranked Indonesia third after China and India in terms of investor confidence.
Presenter: Katie Hamann
Speakers: Robert Scholten, Indonesia's ING Securities President Director; Sofyan Wanandi, Indonesia Employers Association chairman
HAMANN: The Dutch based financial services group ING surveyed 100 investors in each of 13 Asian and Australian countries, including Australia and New Zealand. Indonesia retained its third place ranking from previous surveys in 2008, placing it behind China and India as the country with the most positive prospects.
Robert Scholten is Indonesia's ING Securities President Director.
SCHOLTEN: It did not come as a big surprise to us when we saw the results coming out. Indonesia is one of the countries, as you know that is set for a higher GDP growth than other countries here in Asia. In ING we projected the GDP to grow by approximately 3.5%. The government is saying around 4%, but even if it's only 3.5%, it is still much better than we see in other parts of Asia.
HAMANN: Scholten concedes that whilst expressing confidence in Indonesia many investors remain on the sidelines of the economy, for now. Much of the countries growth is driven by domestic consumption, which is one reason that the plunge in demand for exports in Europe and America has not been felt as strongly in Indonesia as in other Asian nations.
Investors cited the government's swift response to the crisis as one reason for confidence. In late February Indonesia's House of Representatives approved stimulus spending packages totaling 73 point 3 trillion Rupiah or 7 point 3 billion dollars.
Whilst these figures look good, the number of unemployed is growing. Companies began quietly firing contract workers in the last quarter of 2008. Around 350,000, mostly contract workers have lost their jobs already.
Indonesia Employers Association chairman Sofyan Wanandi expects this figure to rise to half a million by the end of 2009. He says plantation workers and those employed in other commodity sectors have been hardest hit so far.
WANANDI: In the commodities prices because they are so much down too � a lot of people have been laid off, especially the outsourcing workers, the contract workers, the daily workers. In the construction level also you see it already that some of these projects are already stopped. I believe that until the end of this year maybe we have around 500,00 people that we have to lay off.
HAMANN: Wanandi is concerned that political wrangling in the lead up to the Presidential elections is distracting the incumbents from their real jobs. He points to the fact despite being included in the budget the infrastructure stimulus package and other spending that was promised in February has yet to materialize.
WANANDI: It's so slow in the implementation of this stimulus you know and that is what we are waiting for. And we are a little bit worried because there is no pushing power, especially the President is not pushing, the Vice President is not pushing anymore of these projects in the implementation, and the minister also and this is where the bureaucracy just keeps a wait and see attitude and this is too long because we have to wait six months from now and that is economical too long during the world economic crisis.
HAMANN: Implementation of reforms and existing legislation remains a barrier for investors too says Robert Scholten.
SCHOLTEN: Foreign investors are still a little bit wary of the legal systems here in Indonesia, which is clearly a concern for many of the investors. The laws and the regulations are in place, its more a matter of implementation, the judicial system should be a little more transparent but from a regulatory point of view it's actually not too bad, its quite liberal and quite benign for foreign investors. I mean certain sectors are of course more difficult, if were talking about the oil and mining and natural resources sector of course is much more difficult to invest as a foreigner.
HAMANN: But, like the investors his company surveyed, Scholten remains positive. He says if incumbent Susilo Bambang Yudhoyono is granted a second term as President and Indonesia improves its implementation investors will begin to put their optimism into action.
SCHOLTEN: Another five to ten years if the situation continues with a very benign political environment and a better judicial system I see no reason why foreign investors would not actually start to come in, in droves here. We see this already happening.
SFX: Male speaking Bahasa.
HAMANN: This is good news for young workers like 20-year old Noor Hadi. He lost his job at a furniture-making factory in January. He says he doesn't know much about the global financial crisis but he and his friends are definitely feeling its effects. He's had one job interview in three months. For now, like many millions of Indonesian's, Noor relies on the informal sector to make a little cash. Every Sunday he and a few friends ride around on Jakarta's public buses, singing for their passengers.