Indonesia’s economy is being driven by a growing middle-class, but some fundamental flaws need fixing for the growth to continue. Reggie Ho, editor of sister publication Business Traveller Asia-Pacific, reports
THE NEWS IS IN: Indonesia’s economy grew by 6.4 per cent in Q2 of 2012, surpassing Q1’s 6.3 per cent – and that’s despite the slowdown in exports, which dropped 5.8 per cent in May. This country of more than 242 million has remained economically robust, with a growing mining industry as well as strong domestic consumption.
One example that illustrates this is technology supplier Bosch: at its latest annual press conference in Indonesia, held in August this year, the company announced that in its 2011 business year it reported a 42 per cent growth in Indonesia-based revenue, totalling US$93 million. It also revealed plans to open more offices in the archipelago.
At the end of last year, Fitch Ratings brought Indonesia back to investment grade after 14 years of junk ratings, and in January this year Moody’s Investors Service followed suit. Suddenly things are starting to look up… but it has been a long road.
INCREASED STABILITY?
After the 1997 Asian financial crisis wreaked havoc on the Indonesian economy, Suharto resigned as president and ended some three decades of authoritarian rule. The country subsequently went through a difficult period of political reform, culminating in its first direct presidential election in 2004. Since then increased stability has propelled economic development, and in 2011 Indonesia ranked 16th in GDP, according to the World Bank.
Although this ranking was still relatively low for a country with the world’s fourth largest population, given the speed with which its economy is growing and the continuous turmoil in the eurozone, Indonesia will almost certainly be a few slots higher at the next count.
When I arrived at Jakarta Soekarno-Hatta Airport earlier this year, I could immediately feel the buzz. The airport handled 51.5 million passengers last year, which makes it the 12th busiest in the world, surpassing Changi as number one in south-east Asia. Unfortunately, the facility was built in 1985 for 22 million passengers a year, and there has been no major upgrade since. The facility felt dated, and the immigration queue was long and slow.
However, things are expected to improve: state airport operator Angkasa Pura II broke ground on August 2 on the expansion project for Soekarno-Hatta, which aims to boost passenger capacity to 62 million people by 2014. But optimism is tempered in a country where infrastructure projects have been known to experience delays and cancellations.
Driving from the airport to the Pullman Jakarta Central Park (Accor’s five-star property opened late 2011) also gave me first-hand experience of the city’s infamous traffic. Much of the time the car moved at a snail’s pace, but I was luckier than some, as my hotel’s location in West Jakarta was closer to the airport; my transfer took 45 minutes, but had I been staying downtown the journey would’ve been well over an hour.
The Pullman is located in a new 21-hectare, mixed-use development called Podomoro City, which was born out of the need to get around the city’s traffic issues. “It’s like a city within a city; we have the office building, we have the retail complex and there is a hotel, so it’s very convenient and people can stay in one area,” says Veri Y Setiady, executive director of Agung Podomoro Land, which developed the project. There are 11 apartment towers in the development, as well as four hectares of green space.
Setiady adds that shopping centres have become a way of life in Jakarta, with people spending an average of five to six hours per visit. Other than Jakarta residents themselves, a large chunk of Podomoro City’s retail business comes from visitors from other cities in the country. “The middle-income sector is growing very fast, and they mostly go to Jakarta for shopping and spending the weekend with family. It’s good to have Pullman Jakarta Central Park, as on weekdays it’s mostly businessmen, and at weekends it’s mostly families,” he said.
DEALING WITH CHAOS
For business travellers who do have to venture into the centre of town, dealing with chaos is part and parcel of each day – even crossing the road can sometimes be nigh-impossible.
Around the main roundabout of Jalan Bundaran HI, in the beating heart of central Jakarta, the roads are not well designed. There are few crossing points, and pedestrian bridges look old and shoddy. You find yourself asking why, with the country becoming increasingly affluent, the necessary public works aren’t following at the same pace. The sad answer, of course, is corruption – a fact acknowledged even by the country’s president Susilo Bambang Yudhoyono when he spoke to parliament in August this year, ahead of Indonesia’s independence day.
Although the country’s leader has spoken out, few believe things will change much in the short term. Fabrice Mini, general manager of the Pullman, has lived in the country for 15 years and speaks Bahasa. He told me: “Indonesians are the most sincere people you could ever meet, but a few individuals can be funny when it comes to money – those who would have the tendency to want to take as much as possible, because of the idea of ensuring their own future.”
The best example of how its under-regulated environment has hindered infrastructure development is perhaps the scrapped monorail project, which was halted in March 2008 after 150 columns had already been built. The cessation was due to legal and financial problems with the developer.
Discussions have recently begun between government officials to use the columns for an elevated bus rapid system (BRT). The Indonesian capital currently has Transjakarta, which is a BRT on ground level but with dedicated lanes. The head of the local branch of the Indonesian Transportation Society, Tri Tjahjono, has been quoted in the local press saying he supports making use of the columns for a new BRT system, instead of reviving the monorail project, as it would cost less and require no new expertise in maintenance. But a final decision might still take years.
Indonesia is without doubt rich in potential, but if improvements to infrastructure and regulatory systems do not happen fast, things will reach breaking point and development will slow to a crawl or stop altogether. “There are too many political issues here, so they are not focused,” says Setiady. “We need a very strong leader.”