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Moderation
is the avoidance of extremes. And this is what we believe will be on
the cards for Indonesia in the next few years, no matter who is elected
as the next president.
All three presidential candidates do not have sufficiently different
economic policies to seriously derail Indonesia's stability, in our
view.
At the end of the day, economic improvement for Indonesians is at the heart of every presidential candidate's campaign.
With severe economic disparities, "Thaksinomics" - populist economic
policies aimed at the rural poor - is alive and well in Indonesia,
keeping most people sufficiently happy, and tumultuous civil eruptions
at bay.
Consequently, no presidential candidate is willing to suggest that
programs such as Raskin or BLT would be discontinued in the future.
The lack of economic drive is sparking little excitement in the choice
of presidential candidates as the same old party leaders appear to be
saying the same things.
Having said that, it is unlikely that the country will embark on exponential growth in the next five years.
To escape from this moderate economic grind, the next president must
attempt to reinvent the manufacturing sector in order to create much
needed jobs.
It is imperative that Indonesia must attempt to alleviate its
dependency on the extractive-based (i.e. mining related) economy, which
has the propensity to put wealth into the hands of a few.
In terms of manufacturing, the problem is that Indonesia has been
losing competitiveness to the likes of Vietnam and China. In fact,
Indonesia has been losing competitiveness to China since 1994 when the
yuan devalued significantly.
Leaders and officials of the next government must also focus on
agricultural improvement. In order to catch up with Thailand, Indonesia
must provide free training and education to farmers.
This in turn will induce and enhance the entrepreneurship that is much
needed in Indonesia. While entrepreneurs are aplenty, they tend to
remain small due to impediments related to government policies and lack
of institutional reforms.
Other development agendas in the next 5 years should include more
spending on infrastructure, education, health care and social
protection. On the latter, this means laying the groundwork for a
future National Social Security (NSS) system that is clear, feasible
and affordable.
At the same time, further improvements in Indonesia's proven and
successful social assistance and poverty alleviation programs such as
PNPM, BOS and BLT must be implemented.
However, in order for spending to be effective, institutional reform must also be accelerated.
On infrastructure, this is an old song that has been sung so many
times. We believe the key is to pick a single major project and see it
through, as opposed to attempting to do too many things without much
success.
It is high time that Indonesians got their act together with a view to proper implementation of plans.
Unless we all work together, economic growth in Indonesia is likely to
remain below par, while external demand on the part of neighboring
countries is likely to be lower going forward on the back of weaker
trade and recovering commodity prices.
For Indonesia, with serious challenges posed by the increase in
government debt and the projected winding down of monetary stimulus,
moderate improvements and growth in the next five years should thus be
seen as a blessing.
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