Congratulations, Indonesia and incoming President Widodo

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It’s final—Jakarta Governor Joko Widodo becomes president of Indonesia in October after the Constitutional Court threw out the poll protest of former General Prabowo Subianto, who was strongly supported by many of the past’s military and political establishment.

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This is good news for the further socio-economic development of the largest country and economy of Southeast Asia, which has been successful in becoming a real republican democracy these past two decades and a half.

Unfortunately, while economically Indonesia has also been developing successfully, foreign investment inflow slipped to its slowest pace in five years in the first quarter of 2014. Some analysts saw this to have been caused by uncertainty ahead of the elections. Foreign investors probably feared new economic nationalistic policies would be introduced to undo the globally acceptable policies of outgoing President Susilo Bambang Yudhoyono.

Under the Yudhoyono administration Indonesia has improved its GDP growth rates as the region’s top economy in size and performance, to the point of being made a member of the G-20, the Group of best performing rich economies and the best performing emerging economies of the world.

One reason other than the elections that made not only foreign direct investments but also exports slow down– crimping Indonesia’s economy—is the conflict between the government and foreign mining conglomerate Freeport-McmoRan Inc over new mining tax rules. It seems that as we write this editorial, however, Indonesia’s chief economics minister, Chairul Tanjung, one of the country’s richest businessmen tapped by President Yudhoyono to join the government not too long ago, and the legendary American mining industrialist who chairs Freeport-McMoRan, James Moffett, have agreed to end the six-month deadlock. That conflict has already cost Indonesia more than $1 billion and could mean the loss of thousands of jobs if it is not ended.

What the new team of incoming President Joko Widodo must do to make Southeast Asia’s top economy really go north is exactly what we Filipinos must do in our country. These improvements include making the system for obtaining business permits easier, upgrading the country’s ports, and focusing attention on Indonesia’s electricity network, which is unreliable in some parts of the country. As in the Philippines, firms that want to do business in Indonesia usually complain that they have to obtain permits from different agencies, which sometimes issue contradictory messages. Also poor infrastructure in Indonesia makes the transporting of goods around the vast archipelago difficult, limiting the growth of the domestic market.

Foreign investors are keen to shift to Indonesia because of rising wages in nations like China and Vietnam, so the world’s largest archipelago can ably compete in attracting investments given its large domestic market of 230 million Indonesians.

Indonesia is the Asean country most friendly to us Filipinos and, perhaps, vice-versa. What a great development it would be for the two countries to really unite as a single economy, more tightly knit than the imminent formation of a single Asean economy after December 2015.

Ironically, that could be made possible by the established presence here of the Indonesian-Chinese Salim Group, one of Indonesia’s richest conglomerates, which is virtually the owner of some of our largest and wealthiest corporations.

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1 Comment

  1. Phylliss Quinn on

    Indonesia and the Philippines are like one beautiful country, both rich in the culture of their people prior to the arrival of Western explorers and colonizers and Muslim prozelyters. You are correct in saying it would be a great development for Indonesia and the Philippines to the most integrated economies among all the countries of the Asean region.