Indonesian Elections Won't Derail Stability

Harry Su, a leading economic researcher in Indonesia, writing for a major securities house about the upcoming presidential elections on July 8th said, "All three presidential candidates do not have sufficiently different economic policies to seriously derail Indonesia's stability, in our view".

Observant readers will have noticed the same piece in the paper the day before, but with the copy editor's nightmare of a typographic error that left out the "not" apparently leaving Indonesia derailed and unstable. But luckily it is neither.

The Jakarta Post is a good newspaper and did the right thing, apologized and republished. But that is really the point about what is happening now in Indonesia. Democracy here is coming of age after such a short decade-long transition from authoritarianism. Everyone seems to be doing the right thing.

Here is a country that seems to be learning from its mistakes. And moderation is the key.

Harry Su went on to say, "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."

The main thrust of his economic arguments fell into three categories:

First, all presidential candidates have to maintain an element of populist redistribution which seems to have kept "tumultuous eruptions at bay". He recommends to lay the foundations for a viable long-term National Social Security System to complement shorter-term social assistance and poverty alleviation programs.

Second, that all the candidates have to try to shift the economy from its extractive past towards putting more into agriculture and restoring competitiveness in manufacturing, to the backdrop of greater challenges in national debt management, weaker trade and recovering commodity prices.

Thirdly that national under-performance in improving basic infrastructure might be best addressed by a single large flagship project, pursued with great determination, to show that Indonesians can focus on implementation.

Finally Harry Su makes a plea for economic unity "Unless we all work together, economic growth in Indonesia is likely to remain below par".

Underlying all this remains the need for institutional change, which to most observers means more stress on public administration reform, as well as continuing to tackle corruption.

And perhaps not to throw the baby out with the bath water of reform, since the strong state-backed economy, large state budget, and state-owned enterprises, despite their downside, buffered the country from the global downturn and helped avert disaster.

Incumbent President Susilo Bambang Yudhoyono, heading up a coalition of his Democratic Party and key Islamic party allies, with his squeaky clean running mate Boediono, previously head of the central bank, has the advantage of projecting positive economic achievements.

Although Indonesia's polls are notoriously inaccurate, and usually paid for by the candidates, Yudhoyono appears to remain vastly more popular than either former President Megawati Sukarnoputri or Vice President Jusuf Kalla. Yudhoyono's approval ratings remain above 60 percent, leaving Megawati and Kalla far behind.

That is because, under his four-year reign, in the middle of the worse global economic downturn in 70 years, Indonesians have the luxury of economic growth that is perking along at about 4.5 percent, sustained by the highest consumer confidence for some time, the lowest monthly inflation rate year-on-year (about 3.95 percent) for nine years and a major drop in the number of Indonesians living in poverty, down 23 percent from 39.3 million in March 2006.

And, although corruption continues to remain a major problem, the perception is that it is waning. The country's fearsome anti-corruption agency has jailed at least nine national lawmakers, the former central bank governor and his deputy and scores of lesser officials.

Kalla, of the business-oriented Golkar Party, with his running mate ex-general Wiranto leader of the People's Conscience Party (Hanura) can claim part of these achievements as incumbent Vice-President and he has a track record as a practical businessman.

Megawati, leader of the Indonesian Democratic Party of Struggle (PDI-P), with her running mate ex-general Prabowo Subianto, leader of the Greater Indonesia Movement Party (Gerindra), stands as an historical icon for pro-poor and populist economic policies, having launched her presidential campaign from a landfill site.

It was left to the dean of the Indonesian diplomatic corps, United Arab Emirates Ambassador Yousif R Alsharhan to speak for the whole diplomatic community at a recent meeting of regional diplomatic deans, when he commended Indonesia for its mature democracy, with 171 million voters going to the

"The election here is peaceful" adding this was a great achievement as elections in other countries often led to violence.

He confirmed there had been no complaints of anything untoward during the elections from over 80 embassies. "Compared to other countries, Indonesia is more advanced in practicing democracy". "Indonesia is the best".

Terry Lacey is a development economist who writes from Jakarta on modernization in the Muslim world, investment and trade relations with the EU and Islamic banking.