But from one doorway wafts the incongruous scent of Christmas. In a large concrete-floored warehouse sit waist-high pyramids of cloves, pallets of nutmeg and sacks filled with spices. Merchants weigh their wares on old-fashioned scales. The only concession to the 21st century is their smartphones.
Four centuries ago these spices were literally worth their weight in gold. Small wonder that the Netherlands, Britain, Spain and Portugal spent two centuries battling for control of the spice trade. The Dutch prevailed, and the Dutch East India Company (VOC)—whose territories would become first the Dutch East Indies and then modern Indonesia—prospered mightily thanks to its monopoly on the spice trade. But eventually the bottom fell out of the market as the VOC lost its monopoly.
As spices became less lucrative, Dutch colonists turned to other commodities. They mined tin and coal, developed oilfields and created massive plantations to grow tobacco, cocoa, coffee, rubber, tea, sugar and indigo. After gaining independence in 1945, Indonesia retained a commodity-based economy.
For its entire modern history, money grew on trees, bubbled up from beneath the sea and was dug out of mines. Today Indonesia is South-East Asia’s biggest country by both population (255m) and size of the economy. It produces most of the world’s palm oil, as well as large shares of its rubber, cocoa, coffee, gold and coal. Commodities make up around 60% of the value of its exports. When the world was buying, Indonesia prospered: its GDP, both overall and per person, grew steadily throughout the late 20th century (except during the 1997-98 Asian financial crisis) and well into the 21st, thanks largely to a ravenous China.
But in recent years, as China’s appetite has waned and the price of commodities plummeted, Indonesia has struggled. Between 2010 and 2014 its overall growth rate fell from 6.2% to 5%. As economic growth slowed, it became clear that the country had persistently failed to invest enough in infrastructure and education. Its political system remained narrow and patronage-ridden. Jakarta, Indonesia’s capital and largest city, boomed and Java grew richer, whereas millions of people in the far-flung east felt they lived, in the words of one Ambonese priest, in “forgotten Indonesia”. In 2004, with great fanfare, Susilo Bambang Yudhoyono became Indonesia’s first directly elected president; in 2014 he practically slunk out of office.
His successor, Joko Widodo (known universally as Jokowi), is different from any previous Indonesian president. He does not hail from the Jakarta elite and has served neither in the army nor in parliament. The eldest son of a poor family from the Javanese city of Solo, he acquired a reputation for pragmatism and—most important to his popular appeal—clean governance, first as mayor of Solo and then as governor of Jakarta.
Ordinary Indonesians supported him because he was one of them and had shown himself willing and able to act on Indonesia’s endemic corruption. The local business community cheered his victory because he was also one of them: before entering politics he had been a furniture exporter, and thus understood what it was like to be mummified by Indonesia’s notorious red tape. Foreign investors were pleased that he welcomed them, and hoped he would make Indonesia less protectionist.
Jokowi vowed to return Indonesia to 7% growth and promised a cabinet staffed by technocrats rather than party hacks. He recognised that the era of commodity-driven growth was over. He said he wanted to attract high-value manufacturing and services, and realised that would require massive infrastructure investment and a better business climate. In the World Bank’s Ease of Doing Business index, Indonesia ranks a woeful 109 of 189.
Jokowi got off to a strong start, trimming his country’s wasteful fuel subsidies after just three months in office. Since then, however, the enthusiasm that greeted his election has begun to curdle. He has promised far more than he has delivered so far. Not only has growth failed to pick up, it has continued to slow: preliminary figures show that GDP last year increased by just 4.8%, the lowest rate since 2009. For all the talk about infrastructure investment, too few shovels have hit dirt. Confused policy guidance and lost fights with his party have made him look weak. His foreign policy initially appeared prickly: he blew up neighbours’ fishing boats and executed foreign drug dealers. Fears of radicalisation and religious intolerance are growing. And after seven years of calm, terrorism returned to Jakarta in January: jihadists struck the centre of town, killing four civilians. Many wonder whether their pre-election confidence in Jokowi was misplaced.
This special report will argue that it was not. But in office Jokowi has struggled to find the sense of purpose that drove him as a candidate. His often diffident leadership style has caused needless confusion; economic liberalisation has been slow; and he has shown less appetite than expected for taking on vested interests. He promised voters he would change the sytem. The following articles will explain what he must do to fulfill that promise.
(Source: The Economist, February 27, 2016)