AUSTRALIA is handily located next to
the next big thing in the global economy.
Not that many people here know it.
Even within Indonesia, most people
are still seeing problems rather than opportunities.
For, like other large countries,
Indonesia tends to look inwards and not out.
Muhamad Chatib Basri has a different
perspective, however.
He is the chairman of Indonesia's
Investment Co-ordinating Board, responsible for fostering a pipeline of
investment to keep the country's economy growing at more than 6 per cent - as
it has done for the past half-dozen years except for a slight GFC dip in 2009.
He believes that as China continues
to slow, Indonesia, with its 240 million population, will take over as the
leading high-growth major country.
He says massive structural change
that took decades elsewhere in Asia was compressed in Indonesia into a year or
two - the shifts from authoritarianism to democracy, and to decentralisation.
"We've been through the
worst," he says. "Politically it's noisy, but not a threat" to
economic development. The budget, for instance, has been effectively managed to
being either balanced or in deficit but below 2 per cent of gross domestic
product.
In bedding down these changes,
though, Indonesia did not consider regional models adequately.
"We think we're the only
country in the universe."
Now, he says, Indonesia needs to
step up in its thinking to match its growing responsibilities and its economy.
There are three great hubs in Asia,
he says: Greater China, into which he would place, controversially, Japan as
well as South Korea; Greater India; and Greater Indonesia, the natural hub of
Southeast Asia, with which Australia's trade is worth about the same as that
with China.
Basri, who gained a master's degree
and a doctorate at the Australian National University, told an Asialink/ANZ
private briefing that Japan had the chief economic benefits of a baby boom in
the late 1960s, South Korea 20 years later and now Indonesia was enjoying one.
The average age of a productive worker
in Indonesia is 28. So the boom still has some way to go -- as long as the
politics remains stable, and as long as greedy leaders and badly informed
voters don't start insisting on redistributing and spending the benefits before
the age of prosperity is truly bedded down.
Indonesia, like Australia, depends
heavily on its resources sector, which remains the biggest magnet for foreign
investors.
This creates problems as well as
opportunities since, as Basri says, "One of our problems is
governance." He says if Jakarta can't manage this the boom will be
transformed into the resource curse that has blighted economies in other
developing countries.
The uncertainty faced by the
industry places a further burden on the economy.
Basri says the global scene is not
promising.
But "we are the best among the
worst, the least unattractive country" for investment in a slowing world.
And investors, he admits, are
"professional complainers, so we have to indulge their hobby" by
listening and helping.
The external situation -- which, as
he says, Indonesians too often disregard -- is thus becoming one of its strong
suits. How then to reinforce this by building on the pull factor attracting
investors by dint of Indonesian economic virtue?
A long list of reforms remain on the
table. "Typically," Basri says, "the cost is immediate but the
benefits are medium to long term. Politicians are reluctant to spend their
capital on reform when the return might be reaped by another administration.
"So we who want reform have to
choose our battles."
The key battleground in Indonesia is
in local government, he says. His answer is to highlight those that treat
investors properly and are attracting jobs and thus prosperity.
But government investment is not an
answer. "Governments are very bad at picking winners, but losers are very
good at picking governments" to sponsor them.
by:
Rowan Callick From: The Australian
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