The Water Dragon year of 2012 is about changes. The world will witness a combination of orderly change and uncertainty in the eurozone and the US. About half the countries in the world will change their government in 2012, by democratic election or otherwise. They include the US, Russia, France and China, between them representing over 40% of global economic output.
The eurozone debt crisis and the lingering problem in the US have already weakened global economic growth. Output in China and India, which carry the burden of being the locomotives of global economic growth during the current crisis, has also slowed down markedly. Indonesia is no exception, and we will feel the pinch of moderating commodity prices and continued financial market turbulence sooner or later.
Yet, optimism abounds that we will able to survive the looming external shocks, be they through trade or financial channels. On December 15, Fitch Ratings upgraded Indonesia’s sovereign rating to an investment grade, albeit the lowest one of BBB-. This upgrade restores Indonesia’s rating to its pre-1997 crisis, not a trivial undertaking in 14 years.
A string of extraordinary events in early January greeted us with an upbeat tone. A car assembled by vocational high school students in Solo, Central Java, has stirred public enthusiasm. The car’s standing got a new boost when the Mayor of Solo, Joko Widodo (Jokowi), drove the car and announced that he would use it as his official car. Not to be outdone, the politicians at Senayan also want to ride the wave of popularity, and will hold a special hearing on the now famous car.
The Solo car phenomenon is not only about a longing for a national car. Jokowi captured the public imagination with his statesmanship, invoking a sense of national pride and a “we can” spirit. The car has transcended its material parts to become a symbol of national hope at a time when domestic industries are increasingly under attack from imports and market-seeking multinationals.
The World Bank’s December report indicates that manufacturing growth remains strong, with non-oil and gas production increasing by about 7%, the highest since early 2005. Employment in non-agricultural sectors continued to grow strongly in 2011 at 5.4% or about 3.6 million new jobs, led by the construction sector (13.4%), real estate (51%) and the financial sector (also 51%).
All of these achievements represent hope for a better future for Indonesia, although many challenges remain.
A decade before the Asian financial crisis of 1997, Indonesia’s manufacturing grew rapidly and at par with that of neighboring Malaysia, Thailand and South Korea. After the crisis, industrial growth came to a halt, with the manufacturing sector recuperating more slowly in Indonesia than in its neighbors.
Rising commodity prices since the Asian crisis have shifted Indonesia’s exports toward commodity and resource-based manufactures, at the expense of traditional manufactures such as textiles, clothing, shoes and electronics. In the meantime, the decline in the relative price of tradable versus non-tradable sectors — as reflected in the appreciation of the real exchange rate — also applies downward pressure on the profitability of exported manufactures.
Recently, however, manufacturing has started to pick up, profiting from both domestic demand and favorable international developments related to Indonesia. The automotive sector is becoming the largest market in ASEAN, while motorcycles are already the third largest globally. Global players such as Toyota, Daihatsu, Hyundai, Honda and Suzuki have announced sizeable investment in expansion. Many of these brands also indicated that they would not only serve the Indonesian market, but also export to other countries, particularly in Africa and the Middle East.
The World Bank report also indicates that chemicals, textiles and garments have picked up recently. Chemicals grew 20% in 2011, driven particularly by a shift in global demand from cotton to synthetic fibers such as polyester and rayon. Construction and mining sectors remain strong, epitomized by the expansion of Caterpillar, a US-based heavy machinery producer, opening its second plant in Batam.
Clearly, Indonesia needs to revive its manufacturing industries to create high-value jobs that can raise living standards. Sustained growth in manufacturing requires policies that promote investment in manufacturing and eliminate bottlenecks. Recent initiatives by the government to provide tax incentives to short-listed sectors are to be welcomed in this context. Similarly, the drive to build double-track train lines in the industrial corridor of Northern Java, to boost the capacity of ports and airports — all targeted to improve connectivity and reduce logistic costs — is right on target.
With the ominous effect of the global crisis, a focus on structural reform to reduce bottlenecks (including infrastructure and bureaucratic reform) becomes a necessity as an integral part of the three-pronged strategy of macroeconomic stabilization, structural reform and the creation of a social security net for vulnerable groups.
In reality, to transform the Solo car phenomenon to become a proud national car program will require coherent policies, strong political will and, above all, hard work. All of these require an ample supply of inspiring leadership.
We ended the year 2011 with a sense of longing for leadership. This is not unique to Indonesia. In the US, President Obama’s estrangement from his voters is only growing larger. In the eurozone, the absence of leadership manifests very strongly as the EU flounders from debt crisis to economic crisis, and as peripheral countries risk bankruptcy. Germany is the only economic and social model that is working within the EU and, yet, it cannot take a natural leadership position because it can easily fall into a guilt trip.
The jasmine revolution in the Middle East has left many countries in limbo without leadership to navigate their newly found freedom into a workable democratic system. In India, its innovative diarchy in which the prime minister is the administrative head but not the political leader is running out of effectiveness.
The absence of leadership has permeated and become a contagion spreading from one country or even one region to another. As alluded to earlier, there will be a change of government in many countries in 2012, and that brings a hope for better change.
In Indonesia, pundits have called for President SBY to be more decisive in his handling of the many problems in the country, from eliminating the infrastructure deficit and handling local conflicts to addressing discontentment in general. The worry is that with the perceived weakening of state authority and rules of laws, people will exploit violence to express their grievances and to pursue their demands.
With this backdrop of the longing for leadership, refreshing figures like Jokowi and Dahlan Iskan, the new minister of state-owned enterprises, become an instant hit in the eyes of the starving public. Jokowi was also in the political spotlight when the Indonesian Democratic Party of Struggle (PDI-P) said it was considering him as a potential candidate for the election of the governor of Jakarta this year. Another figure, Budi DH, with an impressive track record in his two terms as the mayor of Surabaya, also captured the public imagination. Jakartans who have to endure the torture of traffic and dismal public services are longing for a new figure to replace the ineffectual incumbent.
Dahlan Iskan has grabbed public and political attention with his no-nonsense, business-like approach in managing his portfolio. When Dahlan rode the Jabodetabek commuter train to attend a cabinet meeting, the public and the media instantaneously fell in love with him. Sensing this public sentiment, several political parties have expressed their interest in considering him as a (vice) presidential candidate for 2014.
Clearly, the demand — and elusive hope — for leadership is brewing and yet the supply is somehow constrained. It is by no accident that Jokowi, Dahlan and Budi have become the darlings of the public as people are longing for better conditions for their lives. Jakartans are longing for better and efficient public transport and better urban living environments.
The trend of increasing urbanization is unstoppable, and that brings with it the increasing burden on the physical and social infrastructure of Jakarta. At the same time, Jakarta also symbolizes the hopes of fresh graduates who want to pursue a better life, just as the children of farmers dare to defy the odds, the hope of many who believe that our beloved Indonesia has a place for them too.
In tribute to Vaclav Havel, the first president of the Czech Republic who died in December, it is fitting to invoke his thoughts on such circumstances. For Havel, the real question was “whether the ‘brighter future’ is always really so distant. What if, on the contrary, it has been (around) here for a long time already, and only our own blindness and weakness has prevented us from seeing it around us, and within us, and kept us from developing it?”
In Havel’s sense, we need a spirit, determination and the will to live within our own truth to make changes in our own souls, in our political positions, and in our chronological history.
Running on an agenda of hope and change, Obama took advantage of the zeitgeist in a country that was weary of insurmountable problems. Obama charmed even the most cynical of his own party to be audacious enough to hope that things would change under an Obama administration. The rest is history, after he was elected as the President of the United States in 2008.
Jokowi and Dahlan are not running for public office, at least not yet. Nevertheless, they do capture our audacious hope that things could and should be better for Indonesia. Echoing Bonnie Tyler’s lyrics in Holding Out for a Hero, all of us are waiting for a streetwise Hercules, all of us are longing for leadership. That would be our hope for 2012 and beyond.
Farid Harianto is Contributing Editor to GlobeAsia.