16 November 2010

Has Indonesia Turned the Economy Corner?

I really should get back to writing more dry analysis of business and economics news and the legal frameworks that impact those two areas in Indonesia. Sometimes, I miss writing for a captive audience. My previous life at hukumonline.com afforded me that opportunity.

The amount of money coming into Indonesia through 2010 is the most to be placed since 1998. The amount is a rather impressive USD 23.3 billion. This has been driven by consumers and resources. However, it is interesting that some are suggesting that the biggest factor in this surge of investment is thanks to President Susilo Bambang Yudhoyono (aka SBY). According to those in the know, foreign lawyers, the resurgent confidence is directly related to SBY's ability to fight corruption and terrorism combined with his drive to raise the levels of spending on critical infrastructure.

To be honest, I am not sure that a lot of others, who would also consider themselves to be in the know would agree with this assessment. There is no doubting that the Indonesian economy is going great guns in terms of investment. This might just as easily be attributed to the idea that some investors have reached a point where any risk is justified by the potential returns. It may be that it is simply no longer an option to wait and see and get left behind.

The idea that corruption is under control and that the Indonesian judiciary is sufficiently reformed to make business transactions certain is tantamount to burying one's head in the sand. A recent speech by the former Finance Minister of Indonesia, Sri Mulyani Indrawati, highlighted just how prevalent corruption is and how much of a threat it still is. I would argue she might know about these things, particularly when one considers most people believe that she moved to her current position at the World Bank after getting worked over by Aburizal Bakrie and a compliant SBY when she sort to clean house at the tax office.

The judiciary is still a long way from being an organisation that provides legal certainty to business players. Judges are still on the take. Police officers and prosecutors are also on the take. The recent case of Gayus Tambunan and his ability to get out of jail highlights.

Nevertheless, the surging business environment is providing plenty of legal work, and the numbers of accredited foreign lawyers working in Indonesia has risen from 20 to 50. I will need to make some calls and get the relevant data to substantiate this because as I recall there were like 40-odd accredited lawyers in the beginning of 2009. All foreign lawyers must be accredited through the Indonesian Bar Association (PERADI) if they are to work in Indonesia. It is worth noting that there are a significant number of foreign lawyers in Indonesia who are not accredited by PERADI. This is achieved through technicalities as the foreign lawyer is not employed as a lawyer, but rather in some other capacity.

With all these things to be considered, the question is "has Indonesia turned the economy corner?"


Brett said...

My perspective, being a lawyer and an in-house one at that: corruption and terrorism are side issues. The reason there has been a 'surge' in investment is because Indonesia is growing as a domestic market.

Rob Baiton said...

@ Brett...

A comment on the blog, cool. It has been a while :)

Which was sort of my point. Maybe investors have decided that growth is happening and it will happen without them if they do not take the plunge.

Thanks for passing on your words of wisdom (Maybe it will inspire a few others).