06 August 2010

Positive Economic News -- Indonesia...

The economic outlook and news associated with Indonesia for most of this year has been positive. In many respects, this is not surprising. How much one attributes this to SBY personally or good policy remains a subject of debate among some. There is little doubt that the figures are looking up compared to a few years ago. For the New York Times view on Indonesia and the future economic outlook, and where this graphic was lifted from, go here. It makes for interesting reading.

According to the NYT, Indonesia is Asia's new "Golden Child". This is high praise indeed. Yet, it might be putting the horse before the cart in the sense of being a little premature. Remembering that many thought the fundamentals of the Indonesian economy were pretty solid back in 1997 and 1998. History tells us that these fundamentals were not so solid after all. 

There is also the issue of corruption. SBY came to the presidency with an overwhelming mandate to fight corruption and rid Indonesia of this scourge. He has largely been unsuccessful. So, despite concerns about corruption and confusing local legislation, investors are returning in force, sort of. This is more an indication of businesses / investors recognising the huge upside potential of a market of some 250 million consumers, particularly where the vast majority of these are under 30s and a little more carefree on their consumptive ways.

It is always interesting, at least it was when I lived in Indonesia, to listen to people talking about financial crises, global meltdowns, and other tidbits of economic woe and mayhem. This was because walking the malls of the greater Jakarta metropolitan area, one would be forgiven if they could not fathom where the crisis was. Quite simply, people were still out and about, still shopping, still drinking coffee, still going to movies, pretty much living as they always had. The only concession might have been there were less people in these places, but they were not empty. 

It would also be remiss of me not to note that as soon as you walked out of the luxury of the malls you could see first hand what sort of destruction the financial crises had wreaked on the lower middle classes and the poor.

Nevertheless, the point is that it is not all that surprising that Indonesia has "rebounded" as strongly as it has.

Let's hope that the fundamentals are strong, the government is able to make some serious inroads into the battle against corruption, and the parliament can actually pull the collective fingers out and pass some legislation that will support the fight against corruption and convince investors that the risks they take are not with the applicable legislation.

My apologies to any readers who have more economic sense than me for any shortcomings in my cursory analysis!


Brett said...

Indonesia's economy is nowhere as robust as these figures would have you believe. The economy is basically being propped up by mineral exports, with little or no processing occurring locally. Things are rosy while commodities prices stay high, but... we've been here before.

Rob Baiton said...

@ Brett...

Nice to see a comment on the blog and not only over at Buzz-land.

I did sort of infer that it was perhaps not all as it seems. But, giving the benefit of the doubt to wiser economic minds than my own, presumably, at the NYT, I decided to post the figures and a spiel.

I really do want things to be good in Indonesia, so hopefully the things that could unravel this economic good news don't come to be...

(then someone might have some spare cash to wanna employ someone like me back in J-Town and then Will can get to experience a little more of his other culture)