I have been traveling to Indonesia on business for more than a decade and I find it amazing how pervasive and persistent the discussions on the “Potential of Indonesia” are. Yet in all these years and the years before, it has remained just that, self-motivating talk. With the startup frenzy sweeping the globe and an impending Asian Games in August 2018, the narrative on the fast looming boom in the Indonesian economy is getting shriller.
Indonesia has a lot going for it and Indonesians should be hopeful; a great demographic dividend, a large consumptive domestic consumer class, mineral wealth, functioning democracy, managed religious tolerance, stable banking system, adequate foreign exchange reserves and a keen political class. To be fair, significant progress has been made by the present government to drive Indonesia towards its rightful place in the world order.
Shakespeare in Hamlet wrote, “Your strengths are your weaknesses and your weaknesses are your strengths.” He could have very well been referring to the inherent strengths of Indonesia. There is a sense of deja vu among the global investor community and the going will be much tougher for business, as well as for the government with its own population, let alone the outside world. Stakeholders within and outside the country sense that they have seen this movie before. There is whipped up talk of potential, only for the country to miss the economic gravy train at the last minute for so-called “factors beyond their control.”
Here are the global and local considerations that could derail this attempt to break the shackles of economic turgidity:
- Factors pointing to its potential have been around for a century or more, but so have its problems. The narrative is a status quo and stakeholders need to see more action.
- Globally Indonesia has missed many economic booms and has just missed the latest round. The country slowed down economically when the world economy was booming and now economists are talking of a bubble about to burst and slow down. It may be another miss.
- The business environment continues to be what it was. A bureaucratic kleptocracy mired in self-defeating opaque regulations.
- Recent elections in the capital and elsewhere have brought to the fore a polarisation and hardening on religious lines.
- The demographic dividend could easily turn into a nightmare, if job creation does not keep pace.
- Digital penetration, urbanisation, high smartphone use and active social media usage are all cause for worry rather than celebration, if economic activity does not keep pace. The masses can see the progress in other similar countries and the margin for forgiveness this time around will be wafer thin.
- Populist electoral promises have recently propelled many right of centre leaders to high office. Promises of a million homes and better healthcare, education and mobility solutions have been heard ad nauseum.
- Whipped up hyper nationalism and selective welcoming of imported talent has led to an exodus of expats from the country.
These are not insurmountable, but the country cannot cross the chasm by taking baby steps. The sound bites are hauntingly similar but this time the price of failure could be debilitating to the national psyche. What is needed is:
- A shift to data-based objective discussions and debates instead of emotive ones based on past glory or perceived potential. It is fascinating to watch almost all commentators and analysts basing their views on the same one or two reports.
- A balanced Indonesian economic model in line with the aspirations of the people. Much like India which shunned the American and Chinese models to forge its much-hailed economic path (with many more issues).
- The future must not be a copied version of its “Tiger” neighbours, but one that is beyond. Made-to-fit and imported solutions and comparisons are doing more harm than good.
- A radical set of structural and regulatory reforms to make the system less opaque and open to understanding for global investors. Billions of dollars for all the infrastructure projects will not flow without regulatory reform.
- Manage the narrative that flows out to the rest of the world from Indonesia. For too long vested media interests from outside have driven a lopsided view of the country in global markets.
- Keep the structure of democracy, religious tolerance and coexistence of its diversity as a continuing theme.
- Overhaul the education system completely. Penetration and participation is low, and the country sorely lacks skills required for it to take its rightful place in the world economy. Move to a skill-based curriculum for skills computers cannot replicate in the near and medium term.
- Decentralise economic growth from urban centres and slow the urbanisation rates for a more balanced development.
If ever there was a time to leapfrog the decades of missed opportunity, it is NOW. If ever there was an existential threat to the Indonesian dream, it is NOW. It is a time for bold and decisive action, if not we will continue to be the perennial bride in waiting.