Underrated Indonesia poised to enter global stage


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Indonesia is still underrated globally. Why does the world not notice? One reason is particularly poor performance in sports and higher education, two areas that give countries a lot of international exposure.
Five years ago I went on my first professional trip to Indonesia.  I had just joined the World Bank’s Indonesia Country Team and also prepared for the relocation of my family later that year. My wife was very concerned moving to Jakarta. At that time, Indonesia was associated with the Bali and Marriott bombings, the beginning of bird flu, and memories of the political chaos after the departure of Soeharto were still present.

Today, my wife does not want to leave Indonesia anymore.  What happened?
Indonesia recovered – and it recovered strongly. However, I truly believe that Indonesia is still underrated globally. During the past decade, Indonesia has embarked on one of the most ambitious political and economic transitions ever witnessed in any large country in recent history. According to Freedom House, Indonesia is entering a year of multiple national elections – both legislative and presidential – as Southeast Asia’s strongest democracy.

Economically, Indonesia has quietly moved from collapse and disarray to surprising stability. Indonesia is likely the world record holder in debt reduction (for any larger country since economic statistics have been collected systematically). At the beginning of the decade, Indonesia debt levels reached 80 percent of GDP, the highest in East Asia. By the end of the decade, Indonesia will rank among the least indebted countries in the region. Early 2009, debt levels reached 30 percent of GDP, almost on a par with China.

So why does the world not notice? Since hosting the summit of non-aligned movement in Bandung in 1955, Indonesia has not been really present at the global stage. In addition, Indonesia is particularly poor performing in sports and higher education, two areas which give countries a lot of international exposure.  Over the last decades, Indonesia has followed an education strategy that is broadly based bringing basic education to almost every village. The result is that almost every Indonesian can read and write, but very few have been able to run international companies or establish a strong presence in international organizations.

But in the last months, international perceptions seem to have started to change. Newsweek considered “Indonesia as the New India” and praised its Finance Minister for exceptional macroeconomic management. The Economist recently explained Indonesia’s surprising resilience amidst the global financial crisis.

The last week has been particularly eventful. Hillary Clinton made Indonesia her second stop (after Japan) of her first trip abroad as secondary of state. Then Maarti Attisari, the Nobel peace price winner, is visiting Indonesia to inspect progress on the peace process and post-Tsunami recovery in Aceh, which has become a symbol of Indonesia’s recovery.

My hope is that we are now witnessing the dawn of an emerging Indonesia, a country with a strong global standing – and not only as the one of the world’s best tourist destinations. The next years will be telling. After a decade of political reform, Indonesia is now undergoing a demographic and economic transition out of which a very different country will emerge in the next decade. Within the next five years, Indonesia will reach a population of 250 million, of which 60 percent of which will live in cities, and an economy that could exceed US$750 billion.

Indonesia is one of the best places to live as a family. However, it has been difficult to convince many friends about Indonesia’s beauties. Back home in Germany, people have often still difficulty locating this fourth most populous country in the world.

When I say “Indonesia”, often the response is:  “Yes, I have been there already.  Tunisia is really nice!”

Image credit: webersweb at Flickr under a Creative Commons license.



Wolfgang Fengler

Lead Economist in Trade and Competitiveness

Join the Conversation

Treena Wu
March 10, 2009

We do similar work "on" Indonesia and more importantly I think "for" Indonesia. You're there and I'm here in the Netherlands not so far away from Germany... I sat one table away from Martti Ahtisaari and Governor Irwandi, me just a scholar watching history unfold. This time the moments that I observed were far different from being traumatized in Jakarta while Suharto was being ousted... blood on the streets.

Indonesia is truly an amazing country. It has come such a long way and achieved so much despite the vast challenges faced. I continue to study the archipelago in awe. I'll be moving to UC Berkeley next continuing my work on human capital theory and policy, taking it into the post-doctoral stage; a lifetime for a country.

I share your hopes and wishes for Indonesia too.

Ramesh Kumar Nanjundaiya
March 14, 2009

Having read articles on Indonesia's economic development particularly in the last 3 to 4 years, one can now say that there has certainly been some good developments on the political front and this has lead to a sustained but slow economic growth. The benfits being that a good amount of investments have been directed towards infrastructure development which is vital for them to atleast weather some of the global economic slowdown and crisis that has had its effect across the world and alos to them. Like other SE Asian countries, Indonesia will have to face some of the impact of the global economic slowdown. Thye need to use their resources really well to develop infrastructure, communication and health sector. In this regard, one of the latest initiatives by the World Bank could of a loan could not have come at a better time. The terms of the loan package is called the Public Expenditure Support Facility with a deferred drawdown option (DDO). Whta this will do is provide some good breather to the country which although has clear cut economic development/financial plans is being affected both directly and indirectly by the global crisies. This is by far the largest lona granted by the WB. Indonesia should take full advantage of this and as said earlier on use it for use it infrastructure, communication and health sector. Indonesia will weather the storm.

Sudiro Handoko
March 14, 2009

Firstly I would like to thanks to Wolfgang Fengler, that your view, opinion and witness for restoration and recovery of Indonesia story since became a country with newly democration among the wolrd with one of the biggest population in the world, your opinion is making us proud of our contry, however, we still have many works to be a good country with strong democration, built a prosperity, education, justices, good governance, human rights and human resources. We still need much more funds to reach all above matters. But we hope and believe, someday we can standing more strongly to face and contribute with the global economic and politic.
Also thanks to Treena Wu, I hope you success in taking your post-doctoral, we believe from your information about Indonesia, many people all over the world may knows more about Indonesia, because many people in many countries do not know well Indonesia, but only Bali they known, they do not know that Bali is part of Indonesia. Anyway thanks so much for comments and wish you success in whatever your pursue.

Best Regards,

Sudiro HM.

Wolfgang Fengler
March 18, 2009

Thank you all for your thoughtful comments. It is good to see that many share my cautious optimism about Indonesia. As you all highlight Indonesia's development challenges - beyond managing the current crisis - remain vast. Nearly half of the population lives below US$ 2 a day and public services remain inadequate for a middle-income country. As a result, Indonesia may yet fail to reach several of its MDG targets. However, these challenges don't seem to be inherently different than those of other lower Middle-Income Countries. These are challenges of a "normal country" as Andrew MacIntyre and Douglas Ramage put it in their recent publication (http://www.aspi.org.au/publications/publication_details.aspx?ContentID=…).

Despite the global economic crisis, Indonesia’s main constraint today is not a lack of financial resources. The national budget has risen continuously and will be close to Rp 1000 trillion this year, and most likely rising further to above Rp 1700 trillion by 2014. What Indonesia needs, and has been working on, are effective and accountable institutions that can translate available resources into better development outcomes.

Rahman Abdurohman
March 22, 2009

Your article is one of the only few articles views the future of Indonesia optimistically, besides the one published in Newsweek and the other one published somewhere else. It seems ironic since most of our own analysts are cynical and skeptical with what we have achieved so far. Thanks for your optimism and for the effort to change the world's perception about Indonesia.

It is very possible that the way your wife perceived Indonesia initially is the same the way people around the world view my country. I am living in Australia currently. I am really sad that people from other countries do not really know Indonesia well, and if they know Indonesia, it will be associated with Bali bombing and corrupt government, the most two embarrassing things.

I am a bit relieve to have your opinion here. Almost everyone I met that have experience living in Indonesia will say how comfortable Indonesia to live.

By the way, I think I had already met you in one occasion in Jakarta for IPEA meeting. I came to accompany Pak Askolani (Fiscal Policy Office, MoF) at that time. Now, I am pursuing PhD degree at ANU (Australian National University). I will be doing a research about fiscal stimulus policy in Indonesia. I will be very pleased if you could be contacted for discussion about the relevant issues.
Thanks a lot.

Best regards,


March 27, 2009

Dear Abdurahman,

thank you very much for your kind note. Please contact me any time. Good luck with your PhD.


Andy Panjaitan
September 01, 2009

Hi Wolfgang,

Thanks for your great article, I appreciate your work in Indonesia, and all the best for your new journey in Kenya. As a fellow World Bank staff and an Indonesian living in the States, I agree that many people are still not aware about the presence of Indonesia in the world,however I do hope that as my country is growing in its economy & democratic environment, many people from all around the globe will know better about Indonesia, and most importantly I hope Indonesia will experience more transformation in its social, politic and education system.Thanks again for the eye-opening article!

February 26, 2010

Dear Treena,

Thanks for sharing your thoughts. All the best in Berkley.


October 12, 2013

Indonesia indeed have very very good prospect in term of economic values. It has great natural resources, a lot of human resources and excellent geographic location. However the before strong point can not be capitalised by the government, and more sadly is the corruption issues in Indonesia is still rooting strongly in the government and law enforcement agency.