By Gustav F Papanek of Boston University
Indonesia has a once-in-a-century opportunity to reach economic growth of 10 per cent and give 20m families regular jobs with a steady income. This opportunity is the result of increasing costs of production in China, the world’s leading exporter of labour-intensive manufactured goods. Over the next five years other countries will take a share of China’s export markets for these goods. Indonesia could benefit from this reallocation of industrial capacity because of its large and rapidly growing labour force. Two million workers join the labour force every year but under current policies, only half of them will find stable, formal sector jobs. Indonesia already has millions of “surplus” labourers, currently working in low productivity jobs in agriculture and the informal sector. Moving these workers into productive jobs in manufacturing would double their income, increase exports and raise economic growth to a record 10 per cent.
By Maarten-Jan Bakkum, ING Investment Management
Few emerging economies have been under so much pressure lately as Indonesia. Since 2011, the terms of trade of the country have deteriorated sharply. This came as a result of the Chinese slowdown and the drop in coal, palm oil and rubber prices. After having enjoyed ten years of rising commodity prices, the Indonesian economy is now suffering from price declines of its main export products.
This has pushed local incomes down, with a negative impact on consumption and bank deposit growth. And it has led to a sharp correction in fixed investment growth, because of uncertain commodity demand and tighter financial conditions, partly linked to the widening current account deficit.
Scientists are looking to a tiny variety of killer wasp to spare Indonesia from the ravages of a bug that is threatening the key cassava crop in south-east Asia’s biggest economy.
Since it arrived in Indonesia in 2010, the cassava mealybug – a small white insect that feeds on plants – had spread to the country’s main growing regions for cassava, which is a staple for tens of millions of people and generates around $1bn a year from industrial production.
Japanese fast food lovers: Indonesian yakitori and chicken nuggets may be coming to a table near you soon as Southeast Asia’s biggest economy tries to take advantage of China’s latest food safety woes.
McDonald’s Japan stopped importing Chinese chicken in July, part of a broader backlash after a major Chinese supplier was accused of selling meat beyond its shelf-life.
Few, if any, Indonesians have heard of Gerald Ratner, the former British jewellery chain executive who became notorious for joking that his company’s products were “total crap” and then seeing sales nosedive.
But, in Ignasius Jonan, the head of the state-owned national rail company, Kereta Api Indonesia, they seem to have their own version of Ratner.
When asked why the trains are so crowded, he has a simple answer: you get what you pay for.
Investors have piled into Indonesia’s $1.5bn worth of Islamic bonds, making bids for over six times that amount. So is the strong demand for the sukuk another sign that Indonesia’s economy is becoming less fragile?
The 10-year sukuk, rated Baa3 by Moody’s, was marketed at the country’s lowest yield since 2012 on optimism over the incoming administration of president-elect Joko Widodo. Strong demand – order books were worth $10bn – pushed down the yield, which started at around 4.65 on Monday before being reduced to 4.35 per cent.
Of all the colonial legacies left by Britain, France and the Netherlands in Asia, one of the least talked-about – yet arguably one of the most lasting and problematic – is the patchwork of legal systems that divides the region.
Doing business in the Association of Southeast Asian Nations (Asean) is gradually getting easier thanks to the elimination of tariff barriers, expansion of supply chains and gradual harmonisation of customs procedures.
Yet one of the big “soft” barriers to greater Asean integration, and one which makes life hard for multinationals and ambitious local companies alike, are the differing jurisdictions across the 10-member bloc.
“When eating an elephant, take one bite at a time”, US Army officer and Vietnam veteran Creighton Abrams once said.
In his new book, The Rise of the New East, Ben Simpfendorfer does just that. His elephant is “The East”, the group of almost 50 emerging markets ranging from Turkey to China that is home to well over half of the world population.
Simpfendorfer gives his topic a thorough treatment. While his insights seem logical and intuitive, taken together they give an impressive oversight of into key trends shaping the region. beyondbrics noted five insights that particularly stood out.
All eyes are on the official vote counting process in Indonesia after Joko Widodo, the reformist Jakarta governor, and Prabowo Subianto, a self-styled military strongman, both claimed victory in Wednesday’s milestone presidential election.
Most “quick counts” – based on samples of actual votes cast – predicted a victory for Widodo by a margin of 4 to 5 percentage points. But Subianto has refused to concede, with his brother insisting that their own counts put him in the lead by a margin of nearly 4 percentage points.
It is a truth almost universally recognised that internet penetration in the 10-member bloc known as Asean – the Association of Southeast Asian Nations – is low, even though the region is humming economically.
Or is it?
UBS has come out with some interesting research that will give the e-commerce crowd something to cheer. The bank finds that Asean has a 32 per cent “internet penetration rate”, or almost 200m users, out of a total population of 620m.
This contrasts with market data apparently widely accepted – and cited by UBS – saying that penetration could be as low as 62m users.
Tough-talking former general Prabowo Subianto has put nationalist rhetoric at the heart of his powerful presidential campaign.
But one of his communication advisers is Rob Allyn, an American political consultant has who worked for George W. Bush and Mexico’s Vicente Fox among many others.
Supporters of Subianto’s rival Joko Widodo, the Jakarta governor, have claimed that Allyn is linked to a widely circulated smear campaign that has falsely accused him of being a Communist, ethnically Chinese and not a Muslim.
If ever the phrase “it was the best of times, it was the worst of times” could be applied to Indonesia, it would be to President Yudhoyono’s ten years in power from 2004-2014. Arguably, his first term was the best five-year period of economic reform and revitalisation in the history of the country, while his second term was possibly the worst.
As Indonesia, Asia’s fifth-largest economy, speed-walks towards presidential elections on July 9, it’s probably time now to start looking beyond the elections. What kind of economic-reform program could the newly-elected president pursue to re-ignite our sharply slowing economy?
As it turns out, President Yudhoyono’s first term in 2004-2009 showcases what can be accomplished in Indonesia, given enough political will, and given enough desire to execute and implement. Here’s a sampling of bold, determined and successful reforms from 2004-2009.
Tracking Joko Widodo, the narrow front-runner in Indonesia’s presidential election, is not an easy task, as the FT found out when it trailed him in East Java at the weekend.
The schedule constantly changes, he turns up for events hours late and keeping up with his entourage’s long convoy of cars requires bouts of death-defying acceleration through busy city streets.
The perils of following the Jakarta governor on the stump underline the weaknesses of his campaign, which has lost a 30 percentage point poll lead over the past three months.
For a frontrunner whose campaign has been floundering, the first of Indonesia’s televised presidential debates did not start well on Monday night.
Small-town mayor turned political superstar Joko Widodo had left a large piece of notepaper poking prominently out of his suit as the candidates sang the national anthem.
To supporters of his rival, former general Prabowo Subianto, the wardrobe malfunction underlined their view that Widodo, now the governor of Jakarta, is an uncertain and inexperienced leader, not ready for the highest office.