Inconsistent policy-making may yet undermine its progress
. Although the policy runs counter to free-market orthodoxy and initially led to the closure of many mines, thanks to Indonesia’s clout in the nickel market in particular, it is yielding results.
The second force improving Indonesia’s economic outlook is a rapidly growing consumer-tech industry. This digital boom should help reduce the gargantuan logistical costs that Indonesia’s geography imposes. The eastern and western tips of the country are almost as far apart as London and Kabul. The population is spread across some 6,000 islands, some densely forested and sparsely populated, others teeming with people, farms and factories, almost all of them mountainous.
The central bank’s reserves, of around $130bn, are plentiful. The currency, the rupiah, has dropped by 9% against the dollar since the beginning of 2022, far less than most of its counterparts in emerging markets. Whereas rising interest rates have sucked capital out of other developing countries, Indonesia’s current account has swung from sustained deficit to surplus, as demand for its natural resources has risen.
The law also liberalises Indonesia’s fearsome labour laws. Hiring and firing will become much easier. Industry-wide minimum wages will be scrapped in favour of provincial rates tailored to local conditions. One minister in particular symbolises the ambiguous stance of Jokowi’s government: Luhut Binsar Pandjaitan, the co-ordinating minister for maritime affairs and investment, and a former chief of staff to Jokowi. His vague title belies a broader role as a fixer for big business. He is the first name on the lips of optimistic investors, foreign and domestic, who view him as a canny ally.
Anies Baswedan, the governor of Jakarta until October, is another likely candidate. He became governor with the support of Islamic agitators and conservative voters, which worries non-Muslims, including the many Chinese-Indonesians who are prominent in business. Mr Anies himself is of a mild, bookish mien, however, and his supporters insist he would govern technocratically.