As the Indonesian president’s tenure draws to an end, he sits at the helm of the world’s emerging economic powerhouse
By Sacha Passi
When an estimated 117 million Indonesians went to the polls on September 20 2004, their votes signalled a political shift that would help restore prosperity and stability to Indonesia, following the strife of military strongman and former President Suharto’s rule.
With the promise of accelerated economic growth, anti-corruption, strengthened democracy and human rights, Susilo Bambang Yudhoyono took office with a majority vote and an ambitious reform agenda.
In 2012, he sits at the helm of what is expected to become one of the world’s fastest-growing economies, and has been credited for Indonesia’s sustained GDP growth while leading one of Asia’s most resilient nations through the global financial crisis of 2008-2009.
Economic expert Rajiv Biswas from IHS Global Insight says the president and his economic frontbench have played a key role in the extensive improvements to the country’s macroeconomic settings. “A crucial reform has been cutting government debt as a share of GDP from over 60% in 2004 to only 25% by 2012, while the annual fiscal deficit has been kept very low,” he said.
As a consequence, the country has transformed its credit rating, resulting in increased foreign investor confidence and the projected growth of its GDP to 6.2% in 2012. “Although export growth has slowed down compared to last year due to lower commodity prices, domestic demand is robust,” Biswas said. “This has been an excellent economic performance. The main question is whether Indonesia can lift its potential growth rate a bit higher, to above 7%, which will require considerable ramping up of infrastructure spending as well as other economic reforms.”
To do this would put the country firmly alongside the world’s ‘big four’ advancing economic powerhouses – Brazil, Russia, India and China. While public finance has been well-managed, political interference in the private economy, widespread corruption and a weak judicial system add uncertainty and risk to the country’s emerging political climate.
“The law bends in the direction of the rich and powerful, which undermines transparency and accountability,” Michael Buehler, a political scientist with Asia Society said. “Anti-corruption campaigns [in Indonesia] aim at punishing corruptors and sending them to jail. Almost no reform has happened with regard to the bureaucracy that would reduce incentives to engage in corruption.”
Over the past seven years the Yudhoyono administration has pledged to improve governance and implement a comprehensive anti-corruption agenda. However, many of the reform laws have only been partially implemented, or not at all, leaving legal loopholes rife for graft and underhand business dealings at the expense of the Indonesian government’s integrity. “The ‘reform’ achievements of the Yudhoyono presidency are highly exaggerated as the government continues to protect the interests of an entrenched elite,” Buehler said. “The president is unlikely to extricate himself from these patronage networks in the remainder of his tenure.”
Indeed, Yudhoyono’s time to implement change and hone his legacy is running out, with his presidency set to expire in 2014 due to a constitutional law that bars a president from seeking a third term.
The unprecedented decision to grant clemency to a convicted Australian drug smuggler in May marks one of the president’s most controversial political moves to date. While it could signal a new stage in the president’s leadership agenda, experts say that, at the risk of acquiring the stigma of being ‘soft on drugs’, the strategic move is likely to strengthen Australian-Indonesian relations in the future.
“He has not been a dynamic president in terms of solving Indonesia’s great problems,” said Robert Cribb from the Murdoch University Asia Research Centre. “On the whole he leaves calmness in the national political order… His great legacy will have been to move Indonesia definitively beyond the legacy of Suharto.”