Experts: After 70 Years of Indonesian Independence, Prosperity Within Reach

Mon, 08/17/2015

Indonesia has come a long way in the past 70 years. After breaking free from Dutch colonialism, the fledgling nation established a constitution, it shed an authoritarian government in favor of democracy and today, Indonesia is among the world’s top 20 biggest economies, growing larger each year.

What’s more, an even brighter future is just on the nation’s horizon — if it can capitalize on its abundant natural resources and work out a couple of internal snags, experts and observers say, concurring that all it needs is a little help from the government and a bit of luck in the global market.

A young democracy

Since its transition from authoritarian rule to democratically-elected leaders, the country has seen a dynamic political sphere.

“If we compare the situation to [before] the reform [process started] in 1998, Indonesia now is a democratic country, the third largest in the world,” said Asep Suryahadi, director of the SMERU research institute. “We have a division of power between the executive, legislative, and the judiciary. And the institutions are more or less working.”

Sigit Riyanto, head of the Center for Security and Peace Studies at Gadjah Mada University (UGM), said political diversity and freedom of expression have also increased significantly since the end of president Suharto’s New Order regime, allowing for the establishment of political parties and civil society organizations.

“Previously, it was very difficult or [there was] even no opportunity for people establishing a political party, for expressing their political aspirations, and there [was] also no room for civil society in Indonesia,” he said.

Those changes have been reflected in the Global Democracy Ranking, conducted by the Democracy Ranking Association in Vienna, Austria, which measures the quality of a democracy by examining its political situation, freedoms, economy, people’s health and environment. These rankings show that Indonesia is steadily moving up in the rankings, from 72 in 2008 to 65 in 2014.

The government at the national level is not the only one to see positive changes, though. Locally, too, there have been improvements in leadership and political awareness among citizens, said Sad Dian Utomo, director of the Center for Regional Information and Studies (Pattiro).

“We have several good leaders at the local level …[who] come from the general population,” he said. “And the people of Indonesia have increased their awareness in how to choose a good leader.”

There are still, of course, challenges in Indonesian governance and politics — the largest of which may be corruption. With news of corruption popping up in the media practically on a daily basis, the political system may not yet be where people would want it to be.

The big picture, though, shows some positive trends.

 “Maybe we are still far from the ideal,” Asep said, “but if we compare to the situation in the past, I think we have progressed quite significantly.”

The shadow of corruption

According to Transparency International’s Global Corruption Barometer 2013, 75 percent of people surveyed in Indonesia said they or someone they knew had paid a bribe to police in the last 12 months, and 66 percent reported paying a bribe to the judiciary.

To be sure, the perception of corruption in Indonesia is overwhelmingly negative; and more than 85 percent of respondents felt that political parties, the legislature, the judiciary and the police were indeed corrupt.

Unfortunately, these perceptions have negative repercussions on the nation’s economy.

“[It’s] really bad news for Indonesia because you want to attract investors to build their factories here, their businesses here,” said Febrio Kacaribu, a senior researcher at the Institute for Economic and Social Research at the University of Indonesia (UI). “When I’m talking about investors, I’m not just talking about foreign investors … Even Indonesian investors, if they have money, if they don’t trust the current political system here, they can easily bring their money elsewhere.”

In 2002, the government established the Corruption Eradication Commission (KPK), and there are numerous other organizations and civil societies in Indonesia promoting transparency and battling corruption. However, the persevering negative image of corruption in the public sector may be a sign that the government needs to step up its efforts.

“I think Indonesia would like to prove to the world that Indonesia is on the right track in improving its government,” Sigit said. “Because without improving the government, without improving the administration, without improving the transparency, a big country like Indonesia would [find it] very difficult to compete with other actors in the global community.”

Challenges ahead

Indonesia’s economy has grown significantly in the past decade and a half. According to World Bank data, the country’s GDP per capita has doubled in the past decade and its growth rate has been positive since 1999, though growth has slowly declined in recent years.

However, the nation still has yet to rise to its full potential, experts agree.

“I think Indonesia is now considered a middle power in terms of the economy,” Asep said. “And Indonesia is a very large market and is growing very fast. The middle class is growing quite fast, and that creates large purchasing power for Indonesia.”

The nation’s size and wealth of natural resources, including tin, copper, nickel and gold, makes it an important part of the world economy and even more so for the Southeast Asian economic system, which is set to integrate further with the coming into force of the Asean Economic Community at the end of the year.

But as the value of the rupiah dips, short-term economic forecasts are extremely volatile and not entirely in the nation’s control.

Febrio says the government can do a lot do boost efficiency in the manufacturing sector, which he believes has been underdeveloped in the past eight years.

Moreover, a greater focus on education would be beneficial to Indonesia in the long term, Asep added.

According to the World Bank, the literacy rate in Indonesia is 93 percent as of 2011; however, Unesco reported that the country’s gross enrollment ratio at the tertiary level (total tertiary enrollment as a percentage of the college-age population) was 25 percent in 2011. That leaves much room for improvement in higher education.

“A danger Indonesia is facing is that we may be entering the so-called middle-income trap,” Asep said, “and in order to avoid that, Indonesia needs to shift to a more knowledge-based economy, which will require a better-educated workforce.”

All in all, while the short-term economic fate of Indonesia is up in the air, Febrio said he is positive about the country’s outlook.

“If you ask an economist nowadays, they will talk about the very pessimistic view of the GDP for the next few quarters,” he said. “But if you ask them about what will happen in 2016 and beyond, most of them are very optimistic, including myself.”

“I think currently the government is preoccupied with the short-term issues, especially because of the slowing growth, and the volatility in the currency market,” Asep said. “But I think the government should not lose focus on the long-term issues: stabilizing the economy, investing in people, in health, in education — because that’s the key to maintain prosperity.”

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