The Business Times

Indonesia needs forward-looking leadership

Published Wed, Jul 9, 2014 · 10:00 PM
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THE people of Indonesia voted for their president yesterday. It is only the second time in the country's history that they will have a directly elected leader. The election has been a closely fought contest between the two candidates - Prabowo Subianto, a former general, and Jakarta governor Joko Widodo, also known as Jokowi. The race is said to be too close to call and we will only know the final result in the third week of July. But whoever wins will face challenges that are easier to define than to confront and overcome.

Throughout its modern history, Indonesia has repeatedly shown great economic promise and potential, and still does. But oftentimes, its progress has been held back by problems of political uncertainty and governance. Under the outgoing administration of Susilo Bambang Yudhoyono, Indonesia made steady macroeconomic gains and once again emerged from the shadows to be heralded as a key Asian emerging market. Credit rating agency Standard & Poor's (S&P) said in a note yesterday that while Indonesia's sovereign credit quality improved steadily under the 10-year presidency of Dr Yudhoyono, due to political and macroeconomic stability, his administration has had less microeconomic success. The country's infrastructure remains creaky, its investment climate - particularly for foreign investors - remains lukewarm at best and bureaucratic red tape and corruption remain entrenched. It is in dealing with these big-picture issues that the new president must make his presence felt.

Unfortunately, a closely fought presidential race means that the winner will probably emerge with only a small margin of victory, which may not be enough to give him the mandate, or confidence, to pursue bold reforms. Even so, he can send some positive signals early in his presidency. In particular, while nationalism, protectionism and populism with a tinge of anti-foreign investment sentiment may have been expedient during the election campaign, more pragmatism will be needed when it comes to framing actual policies. The new president must explicitly recognise the reality that foreign investment is indispensable if Indonesia is to upgrade its infrastructure and modernise its industry as well as service sectors. The process of opening up may have to be managed carefully; coalitions that support it must be nurtured and encouraged and vested interests resisted. This can take time. But the direction and the intent should be clear from the start. This would go a long way towards restoring a degree of confidence among foreign investors.

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