ASEAN KEY DESTINATIONS
Is Indonesia ready to step up?
By David Swartzemtruber
However, questions remain about how prepared Indonesia is to take on a larger role on the world stage.
A troubling sign came a few months ago when it said it was “not ready” for the Jakarta Composite Index to take its place with the stock markets of Philippines, Singapore, Malaysia and Thailand in a cross-trading platform that is slated to be operational by the end of this year.
The Indonesian government unveiled on Friday more details about the Master Plan for the Acceleration and Expansion of Indonesia’s Economic Development (MP3EI), which is designed to make Indonesia one of the world’s 12 largest economies by 2025. The plan shows a great deal of much needed investment in infrastructure but what about the infrastructure of the mindset. That is where the uncertainty about Indonesia’s suggested preeminence lies.
The old problems of bureaucratic inefficiency, corruption and overall insularity could well hinder the implementation of the master plan.
For example, a recent editorial in the Jakarta Post, protested regulations governing the degree of ownership allowed to foreign banks. The editorial concluded it’s “ high time for the government to amend the 1999 Law on Banking to fit in with the latest developments of national banks. We think the stipulation allowing foreign banks or investors to own up to 99 percent of a bank is too liberal now, given the substantial progress made by our banking industry over the past 10 years.”
The expansion of foreign banks came during the 1997-98 financial crisis when the Indonesian government was forced to nationalize almost all major private and state banks. Data indicate now that foreign ownership of Indonesia’s banking assets has increased to more than 45 per cent from less than 20 percent before the 1997 crisis.
Although the headline of the editorial was, “It is not xenophobia,” coupled with the above issues cited above it seems it will be a considerable time before Indonesia develops the openness and transparency to move up to a true leadership role on the world stage.
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