In what is now more than 30 years of continuous residence in Indonesia, I have – to my own surprise – been increasingly attracted to the impact of economics on development. It has become obvious that a nation’s wealth and the manner in which it is – or is not – shared influences factors ranging from personal satisfaction to geostrategic security. Indonesia’s critical strategic position was one of the reasons I parked myself in the country all those years ago and it remains very true that the direction of the country will be important for regional security in the years to come. Meanwhile, in the Indonesian context, a people famous for their tolerance have made it clear on a number of occasions – most notably in 1998 – that there are limits to that patience.
The objectives set by Joko Widodo on his ascendancy to the presidency in 2014 were eminently sensible, not least a revolution in mindset for a nation that for far too long had wrapped itself up in red tape to limit exposure to outsiders. Less sensible was an expectation that the country could leap into the ranks of the global top 10 economies by the time of the centenary of independence in 2045. That ambition, unlikely from the start, faded into the distance with the arrival of Covid-19. While my book, Indonesia: Dividing the Spoils – Economic Growth and Social Equity in Modern Indonesia, does not discuss in any detail the economic impact of the pandemic, clearly the coronavirus has set back the hopes of many millions of people, not least Jokowi, as the president is popularly known.
Current realities also make it clear that Indonesia – and countries like it – cannot afford to rely only on statistics such as gross domestic product (GDP) as their only measure of progress. In discussing the state of Indonesia’s political economy, I have identified a number of sectors which, while obviously intersecting to form a whole, can be discussed separately. The most dramatic growth has been in the modern sector, where over my time in Indonesia certain areas of the country have been transformed into advanced industrial societies, albeit usually dependent on imported technology. A journey east from Jakarta, for instance, will pass through the very modern landscape of Karawang, center of the emerging automotive industry
But much of Indonesia’s economy is not as observable. The country’s “black” economy – in which revenues and profits are not reported and transactions are dominated by criminal gangs – could be as much as 30 percent of the official total, making it a significant source of growth. But the elephant in the room is the so-called informal or “gray” sector, which is perhaps the least studied aspect of Indonesia’s economy. With around half the population employed here, quite obviously far more work is needed to identify ways and means of improving conditions for people in this segment. This is the key to real progress for the country.