Indonesia has become something of an oddity in an era of globalization: a pariah economy, doing quite well in semi-isolation. Since the Asian crisis of ‘97, foreign investors have been wary of Asia–but have shunned Indonesia, where the crisis hit its nadir in economic depression and political revolution. The Jakarta stock market is a tiny fraction of its ‘97 high, and the Indonesian rupiah has stabilized at about 10,000 to the dollar, or roughly a quarter of its former value. Yet, against this backdrop of gloom, Indonesia grew at a healthy 3.3 percent clip last year, buoyed by resurgent consumers. “We have nowhere else to go but up,” says Jakarta economist Taufiq Alimi.
This growth in defiance of global trends mirrors the story of China, another resilient giant buoyed by a large domestic market. The difference: China is slowly opening itself to international markets that have turned against Indonesia, which makes Indonesia more of a surprise. The Indonesians have thrived in part because the weak rupiah tends to promote exports from Indonesia and discourage imports, providing a double boost to the domestic economy.
The result is a boom largely unnoticed abroad. Domestic consumption is growing at a 7 percent annual clip, driven by small purchases. The 50 million middle- and upper-class Indonesians buy a lot of instant noodles, soap and cigarettes from local companies, which are pouring money into promotion. The ad market is expected to grow 9.5 percent this year. Grey is hiring new staff to serve local clients like Aqua, a bottler that has doubled water sales since 1998. Grey’s rivals are thriving as well. Alan Couldrey of Ogilvy & Mather, another international agency flourishing in Indonesia, says, “People still need to eat, wash, smoke.”
It’s not that Indonesians are confident, so much as tired of gloom. “Even if we still have demonstrations and floods sometimes, people have learned how to cope. We have to get on with our lives,” says Atun Purbo, who runs a Jakarta media and marketing firm. Though scandal and delay still dog the efforts of President Megawati Sukarnoputri to clean up the debts left after the Asian crisis, Indonesians no longer pay much mind. Says Hong Kong-based Indonesia watcher Eugene Galbraith, “We went through a period where people were dependent on the government. And then a period where people were disappointed by the government. Now, people just ignore the government. That’s progress.”
This sense of almost boring stability is on clear display in Jakarta’s newly fashionable bowling alleys. In the last two years, tenpins has become the diversion of choice for families of all incomes. On some weekends, Purbo, her husband and their two young sons wait two hours in line to get on the lanes at the trendy Plaza Senayan mall, where they avoid the main shopping area at all costs. Not long ago, they were worried about bomb threats. Now, says Purbo, “there are just too many people shopping.”
The phlegmatic Megawati seems to set the mood. She recently raised energy prices without provoking protests or riots, a first in the recent troubled history of Indonesia. Then she did it again. But Indonesia’s newfound calm may not survive its public debt, which is $80 billion, or 100 percent of GDP, one of the highest rates in Asia. In the coming weeks, Indonesia will have to sit down with the Paris Club of international lenders to renegotiate dollar loans it cannot afford to pay in full. A cheap rupiah economy is not enough in a globalized world. But it has bought Indonesia some time, and more domestic peace than most outsiders realize.
