Lessons From the Indonesian Experience the World Should Heed

Lessons From the Indonesian Experience the World Should Heed

By Edward Parker on 8:52 am January 8, 2014.
This will be a pivotal year for Indonesia, one in which the political baton will be handed over. Both the nation’s highest offices will have new occupants; the House of Representatives, or DPR, and the Presidency. Indonesia will begin a new journey and a new chapter in its history.The new custodians of Indonesia’s future will face many challenges. In recent months, there has been a chorus of criticism as the economy slowed and the rupiah went into a slide. Commentators poured scorn on the country’s economic outlook, questioning whether it deserves its status as one of the world’s hottest emerging markets.

The issues discussed are often important and the authors offer “words of wisdom” on areas for improvement.

Everyone knows the challenges: Indonesia needs to push further with reforms to move up the economic ladder.

Indonesia does need to do more to stay competitive, but don’t forget the huge successes the country has had. Remember where Indonesia once was — just over a decade ago.

Short memories and short attention spans often underrate progress. Indonesia has made huge strides, in what is in reality a very short period of time. The country and its people should be proud of the progress they have made; hard-fought and hard-won. Indonesia has a lot to be proud of and the rest of the world could learn a great deal from it.

Looking broadly at Indonesia’s recent domestic accomplishments, what the country has achieved is nothing short of outstanding.

After the fall of Suharto’s New Order regime in 1998, many analysts predicted the country was standing on a precipice, poised to tear itself apart in much the same way as the terrible ethnic conflicts that ravaged the former Yugoslavia.

Without a doubt, that was a distinct possibility at the time.

As a vast, sprawling archipelago of over 17,000 islands, hundreds of ethnic and linguistic groups speaking over 300 unique local languages, multiple religious sects and a huge population (estimated at just over 200 million in 1998), keeping sectarian and ethnic conflict at bay would be a challenge at the best of times.

During this tumultuous period, Indonesia was facing political and economic instability, with armed separatist rebellions in Aceh and Papua, and secession from Indonesia by East Timor in 1999.

National disintegration and large-scale ethnic conflict was more likely than not.

Through all this turbulence and difficulties, Indonesia emerged as a multi-party democracy with a directly elected president in 2004.

Indonesia reformed its institutions, rapidly decentralized its governance structure, and came out the other side with its sovereignty intact. A fairly remarkable feat to say the least.

Today, democratic institutions and political stability reassure consumers and attract investors; the streets of Jakarta look a lot more attractive than the streets of Bangkok right now.

Indonesia’s experience offers the world many lessons. Indonesia has proven that a vast country made up of a variety of ethnicities, cultures and religious sects can live side-by-side in one nation state.

“Bhinneka Tunggal Ika” or “Unity in Diversity” is more than just a national motto; it is an underlying principle that has shaped Indonesia.

Indonesia — a Muslim-majority country — just celebrated Christmas with all its modern excess and extravagance and, with it, a true reflection of modern Indonesian values. Don’t let the extremists and the intolerant thugs fool you. These are a mere handful in a vibrant and friendly country of nearly 250 million.

Indonesia’s recent experience demonstrates to the newly enfranchised countries of the Arab Spring that democracy and Islam are mutually compatible in a predominantly Muslim country, with a complex dynamic of ethnic groups, dispelling any notions to the contrary.

This gives hope to countries in Central Asia, the Middle East and North Africa, currently experiencing economic instability, political turmoil and military control, wondering if democracy and peace can ever be achieved. Yes it can.

Today, Indonesia is one of the most energetic economies in Asia, attracting investors from around the world into a rapidly growing consumer market; despite the slowdown. Growth has slowed but is still strong at around 5.6 percent. Despite the negativity of some, this is still the second-fastest growth rate after China in the Group of 20 major economies.

There has also been a lot of recent controversy over proposed changes to Indonesia’ mining laws; natural resources are undoubtedly important, but Indonesia’s economy is more than just natural resources.

Today, an increasingly dynamic economy and growing middle class characterizes Indonesia. These are likely to double to more than 141 million people in the next seven years, according to the Boston Consulting Group.

Young, enterprising, self-reliant and ambitious, Indonesia’s middle class is pushing the economy forward. From banking, to tourism, to entertainment, food and retail, Indonesia’s service sector is driving growth and employment, as well as contributing to around roughly half of total economic output.

During the Asian financial crisis of 1997-1998, Indonesia was crippled as its banking sector collapsed and the country lost a devastating 50 percent of its gross domestic product; worse or comparable to the recent financial crises faced by some Western economies.

But it fought back. It took the hard choices. It did not delude itself by eschewing reforms, which may well have meant its economy ended up as a basket case instead of a breadbasket.

A decade of laborious restructuring of banks, companies and institutions was undertaken. The banking and financial system was completely overhauled and consolidated from 236 to 128 banks, an independent central bank — the Bank of Indonesia — was set up to regulate and supervise the sector and state banks were cut back, with much more room for the private sector.

That same banking sector — brought to its knees just 15 years ago — barely coughed during the 2008 financial crash. Indonesia’s institutions acted decisively to stimulate the economy and weather the impact.

Indonesia’s experience shows that from a crippling economic crisis, in which the country was widely written off, successful turnarounds can happen.

Although Indonesia’s experience is unique, it does provide lessons for the rest of the world. It shows that by being brave enough to make hard choices and undertake necessary radical reforms, economic success can once again be achieved. Many of the continuingly troubled economies of Europe could learn a thing or two.

Indonesia provides an abundance of constructive lessons for the rest of the world. Of course it faces many challenges as we head into 2014, but Indonesia has experienced transformative successes. The media discourse may focus on the negatives, but don’t forget the huge positives.

Indonesia has won a lot more than you might think.

Edward Parker is a writer living and working in Jakarta with experience in Indonesian policy issues. He writes here in a personal capacity and all views expressed are his own.