Positive outlook for RI obscured by reports

Positive outlook for RI obscured by reports

Irawan Abidin, Former diplomat, Jakarta

There is today a great deal more pessimism about Indonesia and
its economic prospects than is warranted by the facts.

The pessimism is understandable: Indonesia has a number of
serious problems as a result of the lingering effects of the
Asian financial crisis that devastated the region in 1997 and
1998, with Indonesia being the hardest hit of all the affected
economies. So hard hit was Indonesia that it suffered social
turmoil and a political crisis.

But there is also reason for optimism that should outweigh all
pessimism that has been expressed about Indonesia.

In the first place, we have a democratically elected
government that is firmly committed to the reform of all aspects
of the national life. These reforms are difficult to achieve and
it will take some time before they are all instituted and
consolidated.

For example, the reform of the military establishment has to
be at a pace that does not disrupt national stability. Moreover,
reform becomes more meaningful if conducted from within by the
military establishment itself, rather than imposed from the
outside.

Another example is the reform of the relationship between the
local governments and the central government: The previous
administration tried to rush the implementation of this reform,
with fairly adverse results. Now President Megawati Soekarnoputri
is trying to correct the defects of local autonomy laws that were
half-baked and implemented rashly.

But reform will continue until they pervade Indonesian
government and society. In the long term, there is no doubt that
the reform movement in Indonesia will succeed, in spite of its
current difficulties.

As to the national economy, we can be guardedly optimistic
that Indonesia will be able to attain modest growth this year,
perhaps by as much as four percent as projected by the
government. Last year, the Indonesian economy grew by 3.32
percent, which was less than the projected 3.5 percent, but we
should be thankful that we had any growth at all, considering
that the most dynamic economy in the region, Singapore,
contracted by 2.16 percent, and another dynamic economy, Malaysia
dropped from a positive growth of eight percent to a flat zero.

What saved the Indonesian economy was robust domestic
consumption, which grew by an amazing five percent, although such
growth is very fragile. Because the government expects the
confidence of the Indonesian consumer to remain vigorous, it has
projected the economy to grow by four percent. If the United
States, which is one of the major markets for Indonesian exports,
rebounds strongly from the recession suffered last year, then it
is just possible that growth this year might be higher than four
percent.

There have been also recent signs that foreign investors have
renewed interest in Indonesian assets.

These positive developments have moved the senior
representative of the International Monetary Fund (IMF) in
Indonesia to predict that the country's economy would become more
investment-driven, provided the government can strengthen the
national investment environment.

Another positive development is the stability of the rupiah.

One more reason for confidence is the fact that both the IMF
and the World Bank fully support Indonesia's tight macro-economic
program.

The positive signs are quite clear, even if they are somewhat
obscured by a lot of negative publicity about Indonesia.