Saturday 21 February 2009

Is Indonesia the country in the best shape in 2009?

Is Indonesia the country in the best shape in 2009?
Indonesia's friendly response to the visit by US Secretary of State Hillary Clinton is the country's latest piece of good news.

By Martin Hutchinson, breakingviews.com
Last Updated: 11:02AM GMT 20 Feb 2009

With GDP growth expected to be 3.5pc in 2009, Indonesia is also suffering only mildly from the downturn.

Elections this year seem likely to result in the continuation of current policies. Islamic, impoverished and with 238m people, Indonesia is surprisingly stable and successful: as its foreign minister said, a "good partner" for the US in the Muslim world.

Indonesia is close to self-sufficiency in oil, but no longer exports it, so it has escaped most of the buffeting from the rise and collapse in petroleum prices. Since its 1998 crisis, it has depended little on foreign direct investment, which peaked at only 2pc of GDP in 2007.

Hence the collapse of global investment flows has also affected it little.

Nevertheless as Indonesia has a GDP per capita of only $3,900, there's a lot that could go wrong. The fact that it hasn't, and that Indonesia seems poised to follow five years of roughly 6pc growth with another year of 3.5pc growth in the worst global recession since the 1930s is a tribute to the political and economic management of President Susilo Bambang Yudhoyono and his long-serving finance minister, Sri Mulyani Indrawati.

Sri Mulyani has proposed a stimulus package, in line with the popular global trend, but of only 1.4pc of GDP, which should not significantly upset Indonesia's budget balance. Legislative and presidential elections this year offer Indonesians the chance to reward the government's competence and polls suggest they are likely to do so.

As its foreign minister, Hassan Wirajuda, told Clinton, Indonesia, as a huge moderate Muslim country, can help the US greatly in reaching out to the Islamic world. It is a large, moderately capitalist country. And it has done well without enormous help from foreign investment, outside policy advice or raw material exports. Indonesia is also a fine economic example to its Islamic neighbours and others.

"Happy is the country that has no history," said Montesquieu. Happier still is the country that has no world-shaking news, other than Clinton's visit.

For more agenda-setting financial insight, visit www.breakingviews.com

http://www.telegraph.co.uk/finance/breakingviewscom/4732842/Is-Indonesia-the-country-in-the-best-shape-in-2009.html

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