By Edward Parker
The year 2014 will be a pivotal year for Indonesia. A year in which the political baton will be handed over. Both the nation’s highest offices will have new occupants; the House of Representatives (DPR) and the Presidency. Indonesia will begin a new journey and a new chapter in its history.
The new custodians of Indonesia’s future will face many challenges. In recent months, there has been a chorus of criticism as the economy slowed, the rupiah went on the slide, and at government policy direction. Commentators pour scorn on the country’s economic outlook and question whether it deserves its status as one of the world’s hottest emerging markets.
The issues discussed are often important and the authors offer ‘words of wisdom’ on areas for improvement. Everyone knows the challenges; Indonesia needs to push further with reforms to move up the economic ladder. Indonesia does need to do more to stay competitive, but don’t forget the huge successes the country has had. Don’t forget where Indonesia once was – just over a decade ago.
Looking broadly at Indonesia’s recent domestic accomplishments, what the country has achieved is nothing short of outstanding. After the fall of Suharto’s New Order regime in 1998, many analysts predicted that the country was standing on the end of a precipice, posed to tear itself apart in much the same way as the terrible ethnic conflicts which ravaged the former Yugoslavia. Without a doubt, this certainly was a distinct possibility during the period. A vast sprawling archipelago of over 17,000 islands; hundreds of ethnic and linguistic groups, speaking over 300 unique local languages; multiple religious sects; and a huge population, estimated at just over 200 million in 1998; keeping sectarian and ethnic conflict at bay would be a challenge at the best of times. But during this tumultuous time, Indonesia was facing political and economic instability, sparking armed separatist rebellions in Aceh and Papua, and secession from Indonesia by the East Timorese in 1999. National disintegration and large-scale ethnic conflict was more likely than not.
Through all this turbulence and difficulties though, Indonesia emerged into a multi-party democracy with a directly elected President in 2004. Indonesia reformed its institutions, rapidly decentralised its governance structure, and came out the other side with its sovereignty intact. A fairly remarkable feat to say the least. Today, democratic institutions and political stability reassure consumers and attract investors; the streets of Jakarta look a lot more attractive than the streets of Bangkok right now.
Indonesia’s experience offers the world many lessons. Indonesia has proven that a vast country made up of a variety of ethnicities, cultures and religious sects can live side-by-side in one nation state. Bhinneka Tunggal Ikaor “Unity in Diversity” is more than just a national motto; it is an underlying principle that has shaped Indonesia. Indonesia has just celebrated Christmas with all of its modern excess and extravagant decor in a Muslim majority country; a celebration of diversity and tolerance, and a true reflection of modern Indonesian values. Don’t let the extremists and the intolerant thugs fool you. These are a mere handful in a vibrant and friendly country of close to 250 million people.
Indonesia’s recent experience demonstrates to the newly enfranchised countries of the Arab Spring, that democracy and Islam are mutually compatible in a predominantly Muslim country, with a complex dynamic of ethnic groups, dispelling any notions to the contrary. This gives hope to countries in Central Asia, the Middle East, and North Africa, currently experiencing economic instability, political turmoil, and military control, and wondering if democracy and peace can ever be achieved. Yes it can.
Today, Indonesia is one of the most energetic economies in Asia, attracting investors from around the world into a rapidly growing consumer market; this continues despite the slowdown. Growth has slowed but is still strong at around 5.6 per cent. Despite the negativity of some commentators, this is still the second-fastest growth rate after China in the G20 group of major economies.
There has also been a lot of recent controversy over proposed changes to Indonesia’ mining laws; natural resources are undoubtedly important, but Indonesia’s economy is more than just natural resources. Today, an increasingly dynamic economy and growing middle class characterises Indonesia. These middle and affluent classes are likely to double to more than 141 million people in the next seven years, according to the Boston Consulting Group. Young, enterprising, self-reliant and ambitious, Indonesia’s middle class is pushing the economy forward. From banking, to tourism, to entertainment, food and retail, Indonesia’s service sector is driving growth and employment, as well as contributing to around roughly half of total economic output. Indonesia’ economy has come a long way since 1997 and has undergone a remarkable turnaround.
During the Asian financial crisis of 1997-1998, Indonesia was crippled as its banking sector collapsed and the country lost a devastating 50 per cent of its GDP; a huge fiscal cost worse or comparable to the recent financial crisis faced by western economies. Indonesia, though, fought back. It took the hard choices. It did not delude itself by eschewing reforms, which may of well of meant that its economy ended up as a basket-case as opposed to bread-basket.
A decade of laborious restructuring of banks, companies and institutions was undertaken. The banking and financial system was completely overhauled and consolidated from 236 to 128 banks, an independent central bank – the Bank of Indonesia – was setup to regulate and supervise the sector and state banks were cut back, with much more room for the private sector. This same banking sector — brought to its knees just 15 years ago — barely coughed during the 2008 financial crash. Indonesia’s institutions acted decisively to stimulate the economy and weather the impact. Indonesia’s experience shows that from a crippling economic crisis, in which the country was widely written off, successful turnarounds can happen. Although Indonesia’s experience is unique, it does provide lessons for the rest of the world. It shows that by being brave enough to make hard choices and undertake necessary radical reforms, economic success can once again be achieved. Many of the continuingly troubled economies of Europe could learn a lesson or two.
Indonesia provides an abundance of constructive lessons for the rest of the world. Of course the country still faces many challenges as we head into 2014, but Indonesia has come a long way in a short space of time. It has had transformative successes. The media discourse may focus on the negatives, but don’t forget the huge positives. Indonesia has achieved a lot more than you might think.
*Edward Parker is a writer living and working in Jakarta, who has worked on Indonesian policy issues.
This writing is taken from The Malay Mail Online, more articles in TheMalaymailonline.com