Economics and Politics: The Future of Indonesia
With Indonesia under his thumb for more than 30 years, former President Suharto’s reign ended in 1998, and the world’s youngest democracy was born. A decade later, the country is coming back from an economic downturn and the effects of the devastating tsunami that rocked its shores in December 2004.
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“It is the first time since the 1990s that we have been able to draw together the experience and expertise of such an amazing panel to discuss key issues that concern us here in Houston, but which are also affecting us on a global scale,” said Martha Blackwelder, executive director of Asia Society Texas Center.
Sadanand Dhume, author, journalist and former Bernard Schwartz Fellow at the Asia Society, and moderator of a panel discussing the Indonesian economy and economic and investment climate, put the country in perspective with the rest of the world by setting the economic scene.
“If you had looked at a map of the world in 1996, Indonesia was near the epicenter in terms of being an extremely attractive investment destination,” Dhume said. “It was widely spoken of belonging to the pack of flying bees that was sort of bringing development across Asia and following in the footsteps of Korea, Japan, Taiwan, and so on. And then we had the Asian financial crisis in 1997 and 1998, and there was a precipitous economic decline, followed by some tremendous political turmoil.
“But when you look at Asia, one of the things that is good to keep in mind is just the sheer enormity of what Indonesian’s are trying to achieve. What Indonesia is trying to do has never been tried before. What they’re trying to do is modernize an economy, democratize the country’s politics and manage a very ambitious decentralization program, all at the same time.”
He then went on to address the panel, asking what challenges they felt were present in helping Indonesia get on track and what three things need to be fixed.
“How easy it is to do business in Indonesia, such as dealing with licenses; protection of investors; and trading across the border (making it easier as far as timing and cost),” said Lucky Fathul Azis Hadibrata, chief representative of the Bank of Indonesia in New York.
Luky Eko Wuryanto, deputy head of Investment Coordinating Board with the Republic of Indonesia, named his top pick: “Things are becoming crucial to the government now,” he said. “Implementing regulations as a follow up to the investment law [which was implemented in 2007]. Things are becoming efficient, but we need an online system. We are still trying to improve the investment climate – tax incentives are developing, and we are learning from China.”
For Elizabeth Collins, associate professor for the Department of Classics and World Religions at Ohio University, the challenges are about doing business within poorer regions of the country.
“Oil companies have a challenge and that is predominantly in poor regions,” she said. “It’s ironic that where there’s oil, you have the poorest people.”
But foreign investment is taking place, and the economy is on the rise.
During the past two years, Indonesia’s exports have grown by 80% with the economy growing by 5.6% in 2005 and 2006, said Sudjadnan Parnohadiningrat, the ambassador of the Republic of Indonesia to the United States. This year’s economy, he said, is projected to grow by between 6.3% and 6.4%.
With the economy in Indonesia growing, representatives on the panel provided an overview of investment opportunities and what the future holds for U.S.-based oil and gas companies looking to Asia.
“You can secure option acreage from the government of Indonesia … which is conducted perfectly by the Ministry of Energy and Minerals Resources. Some projects will be offered to investors with oil and gas areas are also very common as a means to share the risk,” Wuryanto said. “The oil and gas industry in Indonesia is promising.”
