A new friend in Jakarta

A new friend in Jakarta

Indonesia's incoming President, Susilo Bambang Yudhoyono,
takes office tomorrow with a promise of "a beautiful era",
including better relations with the West.

In a public, and unprecedented, gesture of goodwill, the Prime
Minister, John Howard, will attend the inauguration ceremony in
Jakarta. Prospects for diplomatic harmony have rarely been
better. Susilo comes to the job with a polished rhetoric of
political and economic reform, language the West understands. For
Australia, a Susilo government will mean smoother communication
in general, and enhanced security co-operation over the terrorist
threat to Australians and their interests in particular. But just
how "beautiful" the broader bilateral relationship will prove
depends largely on whether Susilo succeeds in reshaping his
nation.

The catch is this. Susilo inherits a faltering economy and
grinding unemployment. On paper, Indonesia's 4.8 percent growth
rate looks like a respectable recovery from the Asian economic
crisis of the late-1990s. But Indonesia's domestic market is so
large that this merely reflects consumer spending. What Indonesia
must achieve, just to absorb the millions of school leavers who
enter the job market each year, is growth of 6 percent to 7
percent. Eight would be better. Anything less and poverty and
deprivation will continue to fuel resentment and instability, to
foster corruption, and, arguably, to feed Islamic extremism. But
these are some of the very problems which discourage the new
foreign investment upon which growth depends.

Foreign investors are clear on what it will take to lure their
money back. For a start, security -- and a very hard line against
terrorists. Legal certainty, clean government, less restrictive
labor laws and keen attention to policy detail -- rather than the
distraction of political infighting -- would greatly assist. This
is a truly sweeping reform agenda. Each area in itself represents
a minefield of vested interests, with political cliques attached.
And despite the popularity of the "reform" mantra there are some
very sensitive issues on the table. Costly oil subsidies, for
example, are unsustainable but any rise in the artificially low
price of fuel will send shock waves through a fragile economy.

What he has running firmly in his favor is the sorry record of
the outgoing President, Megawati Soekarnoputri. The Indonesian
public understands the cost of policy stagnation and wants
change. This is democracy taking hold. He can count, too, on the
support of the international community, including Australia.
Indonesia is a large, important Muslim nation. Its stability and
prosperity matter, far beyond its borders.

-- The Sydney Morning Herald