It seems a distant memory that Indonesia was once predicted to implode. What was once a nation that dominated the international headlines because of its political strife, economic volatility, and ethnic conflicts has rebuilt itself into one of Southeast Asia’s most dynamic economies and stable countries.
While Indonesia might still make prime-time news for outbreaks of violence, those isolated episodes have not shaken the commitment of its over 240 million citizens to uphold democratic government, advocate a market economy, and build a terror-free society.
In 2009, Indonesian civil society groups quickly denounced a bomb attack on a luxury hotel in the capital, Jakarta. Today, there is no turning back on structural reform and vigilant and responsible citizenship.
Through policies aimed at making government more accessible, creating more value in the economy, and distributing wealth more equitably, Indonesia seems ready to assume a higher international profile, in both politics and business.
When observers comment on the dawn of an Asian century characterized by waking dragons and emerging tigers, they are remiss not to mention the garuda, the large mythical bird that serves as Indonesia’s national symbol.
These economies will not only lift the region back on its feet but will also spur rapid development and sweeping social change across Asia.
Indonesia is determined to achieve the potential befitting a country of its size and significance. It hopes to increase the value of its $700 billion economy to $1 trillion by 2014.
Both the government and its citizens believe they have no more than 15 years before the momentum for accelerated change wanes, the natural resource base declines, and its population starts to age. By then, the window to become a great nation alongside China and India will regrettably fade.
Having weathered several crises and realizing the urgency of the task at hand, the government has adopted various policies and measures that hold up the country as a model of balanced and sustainable development not only for the region but also for the rest of the world.
"Reliant on private investment, Indonesia has targeted 'smart capital' or long-term, value-additive investment that creates jobs, spreads growth, reduces poverty, and promotes environmental sustainability."
As the world’s largest Muslim-majority nation, Indonesia engages in interfaith dialogue, cooperates with security agencies to help dismantle terrorist groups, and supports peace efforts in the Middle East.
The country, which is the world’s third-largest carbon emitter, has pledged to reduce emissions by 26 percent by 2020 and has also announced a two-year moratorium on forest clearing, one of the biggest culprits driving climate change.
As a founding member and 2011 chair of ASEAN, Indonesia will play a critical role in regional integration by 2015 and will advise member states, based on experience, on transitioning to democracy and a market economy.
The country has also reaffirmed its commitment to monetary discipline and fiscal prudence in line with G20 objectives. In fact, Indonesia’s inflation has been under control and its debt-to-GDP ratio has shrunk from 83 percent in 2001 to 26 percent 10 years later.
As a nation in which half of the population is under 30 years old, Indonesia has shifted the focus of its education away from an agriculture-based and large-scale industrial economy to knowledge-driven economy. Education spending makes up for 20 percent of the national budget, roughly $25 billion, the largest share given to any sector.
Reliant on private investment, Indonesia has targeted “smart capital” or long-term, value-additive investment that creates jobs, spreads growth, reduces poverty, and promotes environmental sustainability.
As an economy competing for foreign direct investment, Indonesia has redefined economic nationalism by raising productivity of its assets for maximum benefit to its people. As a result, the government has liberalized many sectors that were previously closed and restricted to international investors.
By 2025, much of the world’s economic output and the resulting political clout are predicted to shift to Asia.
With all these major developments in Indonesia, the world could never have predicted that the garuda economy would have reached such heights while staying under the radar.Doomsday scenarios are now long forgotten, and Indonesia has become such a huge contributor to this change that many analysts foresee the country’s inclusion in the so-called BRIC economies.
- This Special Report on Indonesia originally appeared in the January/February 2011 edition of Foreign Affairs