ISSUES OUTLOOK

By Royce Lowe

Indonesia, an “Up and Comer?”

Indonesia is a country that doesn’t just drop from the lip when thinking about the countries of the world. It may be, to quote The Economist, the most important country that people routinely overlook. Where is it? What are its people like? What businesses are they in? Well, the 1990s saw the end of a 32-year dictatorship run by a man called Suharto. Today, some 25 years later, we can say it’s the world’s largest Muslim-majority state, its third biggest democracy, and its fourth most-populous country. Indonesia is made up of thousands of islands that stretch from the Indian Ocean to the Pacific, with five main islands and some 30 smaller archipelagoes, totaling some 18,110 islands and islets, of which about 6,000 are inhabited.

It is young, with 26% of the population under 15, something that might attract foreign investors. And for decades, it has been carefully diplomatically neutral, meaning it continued can well cozy up to both Western and Chinese investment. Over the next 25 years, the country could blossom financially, being the sixth-biggest emerging market by GDP and having grown faster than any other $1 trillion-plus economy except India and China. It’s big in digital services, with over 100 million people collectively spending $80 billion on digital services every year.

Indonesia is the world’s largest producer of nickel, a metal whose star has shone brightly through the advent of the EV battery. It has a fifth of global reserves. It is also the world’s second-largest producer of stainless steel, having recently displaced India. The dark side of all this, of course, is in the mining, the tearing down of trees, and the ocean turning red on the Sulawesi coastline in the southeast of the country. Indonesia has banned the export of nickel and other raw materials to force investors to build factories in Indonesia. Not normal, but the investment is pouring in. Coal-fired power stations are being retired early in an effort to get new industries to run on clean power. CATL, the gigantic Chinese battery manufacturer, is in for a $6 billion project, but the President of CATL, Joko Widodo, also known as Jokowi, is talking to Tesla too. He’s also somewhat of a diplomat and may be the only person to have met presidents Joe Biden, Xi Jinping, Vladimir Putin, and Volodymyr Zelensky in 2022.

If Indonesia stays on its present path for the next ten years, it could end up as one of the world’s ten biggest economies. Although the country is not likely to become a Chinese-style manufacturing miracle, a big middle class could result. A possible future problem for Indonesia is succession. The president’s final term ends in 2024, and the constitution says he must quit at that time. There is, apparently, no obvious successor and some of his supporters want him to get around the constitution to remain in power.

Indonesia was an archetypal Asian Tiger in the 80s and 90s, with booming manufacturing and exports. But manufacturing’s share of GDP has fallen over the past 20 years, owing to both the political and economic turmoil that followed Suharto’s fall and also to the rise of