Indonesia 2030: Asian Dream or Doomstate?

The internet allow the sharing of opinions and points of view. The opinions can vary widely and also be food for thought. One young entrepreneur named Arlo has a grand vision of what Indonesia will become in the year 2030. He sees the following things becoming a reality:

1. Indonesia as the world’s 5th largest economy with an Income per Capita of $18.000 and a population of 285.000.000.

2. Sustainable use of Natural Resources; energy self-reliance and included in the world’s top 10 travel destinations.

3. A modern and equal standard of living for every citizen; Top 30 in regards of the Human Development Index.

4. 30 companies included in the Fortune 500 list.

His vision also says that Indonesia will be a Developed Country that Leads in Natural Resources Management. This all sounds like a wonderful idea, but what are chances of it happening and what is the most likely outcome in 2030?

1. Making new people has never been a problem for Indonesia. The medium age in Indonesia is 26.9 years, the current population, 234 million. GDP – per capita is $3,900 as of 2006, with an unemployment rate of 12.5%. Indonesia has plenty of natural resources the government can sell off to generate money, but the profits from this will not reach the average person, whose income is nowhere near $18,000.

2. Sustainable use of natural resources relies on 2 things; 1. Proper technologies, i.e. controlling mechanisms that measure the harvesting of fisheries, forests, oil reserves etc. and 2. proper mechanisms that limit production and stop illegal use. Right now Indonesia does not have either of these. In the US the Fish & Game people monitor fish stocks, the Forestry Department monitors forests etc.

3. Given the fact that Indonesia has 180 ethnic groups spread over 17,000 islands, it is highly improbable that the population will enjoy a ‘modern and equal standard of living’. As the empowered (educated, wealthy, connected, corrupt) members of society figure out how to leverage their money / connections better, the rate at which they can increase their wealth will accelerate. The gulf between rich and poor will grow faster.

4. In order to have companies in the Fortune 500 list you need investors. Investor confidence in Indonesia has never been great. Until there is a radical change in the court system (prone to corruption), banking system (unregulated) and general ways of doing business (shaky, legal grey areas etc.) investors will not come here and there is no possibility of Indonesia having 30 companies in the Fortune 500 list.

I don’t know where Arlo dreamed up this fantasy, but it merely highlights how far the country has to go. To get Indonesia moving it is necessary to address the mechanism that runs this country. Indonesia has an informal system of ‘gate-keepers’ at every level. There are ‘gate-keepers’ in business, the police, the court system, everywhere. You need to get something done, you have to pay somebody, even if it is that person’s job. There are 2 main reasons why people in positions of power (and often we are just talking about low-level local people) feel comfortable in using their position to operate a ‘personal turnstile’. These are: 1. Insufficient income and 2. No fear of punishment. The way to reverse this is to pay people more money, with the realization they will go to prison if they are convicted of corruption, members of the court system being especially accountable. President SBY has done an excellent job at starting this process, but the cheating mentally is so ingrained, tremendous work will have to be done.