Banking, Economics, Indonesia, Politics - Friday, May 1, 2009 10:44 - 0 Comments

Why Indonesia is positive it can reach its potential

Asiamoney, May 2009

It’s a strange state of affairs when Indonesia stands out in the region for the positive sentiment around it. Wracked for 10 years by financial crisis, banking collapses, wild currency runs and crippling infrastructure deficiencies, Indonesia has for a long time been a story of unrealised potential. But now, as one Jakarta banker puts it, others in the region are “pissed off we’re so happy”.

Should they be happy? On paper, there’s not a lot to suggest so. Most analysts expect a fall from 2008’s roughly 6.5% GDP growth to between 3 and 4% in 2009, with the manufacturing sector entering recession. External debt stands at $149.1 billion, according to Bank Indonesia – almost three times reserves of $50.5 billion – while short-term private external debt is $22.6 billion, according to HSBC, at a time when rolling over of debt has scarcely ever been more difficult. A small bank, IFI, went under in April and other small banks look vulnerable, and as for the infrastructure, there’s been no visible improvement.

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