Indonesia: 2009 will be about the same as 2008

By Michael
Olsson

Reflecting
back on 2008, it has been a year, when we have seen more and more foreign
investors entering into South East Asia‘s
largest and rapidly growing market.

    It has been a year with a huge increase of
investors from Middle East, which will also be the main target group when Indonesia is
hosting the fifth World Islamic Economic Forum in the beginning of March 2009. We
also saw the government lowering its subsidies on petrol, which caused an
increase of about 30% in the retail price, but had very little effect on the
actual petrol usage and traffic.

    Looking
forward, the need for infrastructure in various areas will continue to be, and
the only slow down, besides the financial turmoil, might be the upcoming
elections. The government has announced that it will proceed with most of its
infrastructure initiatives, both for the development of the country as well as
to minimize the effects of a global recession.

    So, I
believe that 2009 will be about the same as 2008, but not more of the same…

    On behalf
of the SBA Board, I wish you all a Merry Christmas and a Prosperous 2009!…

    The police
detachment 88, the special anti terrorist force at the police have had some PR
savvy exercises just before Christmas to really make the public aware that they
are in business and terrorist is not accepted. The effort against terrorism in Indonesia
appear to work well. The public don’t support terrorist acts at all and the
governments determination is higher than ever. Despite this, it should be clear
that only one well armed terrorist in a full shopping mall is enough to create
a catastrophe.

    The new
anti-pornography law is a totally different picture. The fact that the law
encourage people to “act” against “criminals” themselves
opens up the chance for organizations like FPI and FBR to intimidate selected
spots, organizations and even individuals.

    Rumors tells us that there are plans
on making “sweeps” around Java in the near future with this aim. Surely
there are a hysteria and a sense of panic around this new law, that is so
unclear and gray that it is going to be a nightmare to use or defend one self
against.

    But the fact remains that it actually endorse people acting on their
own in its name. An interesting thing would be if people started to destroy
election posters with the argument that they make them feel aroused, it would
be extremely hard for the police to do something about them.

    The
Christmas has passed without any problems and the New Year is most probably
going the to be as calm. Beside the traffic around midnight when everything is
going to be a total stand still in central Jakarta. If you have any plans to go
anywhere, do so before 18.00 and don’t leave until after 3 in the morning since
the streets are going to be filled with celebrators. The area around Monas will
be a sea of people, all wanting to get a glimps of the annual fireworks.

     The
beginning of the year will be filled with tension when more and more people
will loose their jobs and the global reality starts to catch up with Indonesia. The
coming 2009 will not be a easy year for anyone and even harder for me to
predict….

     Indonesia
now have a window of opportunity to grab, China and India have trouble and will
be forced to painful and costly changes in their export oriented economies. The
chance to attract foreign investors, smaller manufacturers with less
sensitivity to the global crisis and the opportunity to export based on a
weakened local currency is there up for grabs.

    Will the government take the
opportunity? It doesn’t look like it, unfortunately. Increased red tape and
rather naive new policies in the efforts to protect domestic, rather
ineffective, industry are what we see instead of more open policies and
streamlined administration. It’s frustrating to see that Indonesia
refuse to learn from history and from other places in the world.

     We will see
a IDR below 11,000 at the end of the year and most probably it will go towards
10,000 when the US
government is trying hard to boost the American economy. Low interest, more
money in the market in US will weaken the dollar sooner rather than later and
the Indonesian government will not be as liberal and keep a more tight ship. The
increased protectionist non tariff barriers against import will start to take
effect on the currency as well, creating a perception of a stronger currency.

     The
unemployment is the real joker in the deal. There are alarming signals on
layoffs in several sectors. Despite efforts to make companies to keep their
staff, it is just to risky and to expensive to keep a large labor force with
nothing to do. The coming election will make the unions as well as any other
NGO’s tools in the election campaigns and this is not something companies want
to have on the doorstep. The government seems to be aware of this problem and
we all hope to see some larger infrastructure projects coming up that will at
least buffer the worst shockwaves during the beginning of 2009……

    With a lot
of Christmas food under the belt, I write this from a rather cold Blekinge even
though we have no snow. The Swedish Christmas is still a lot about TV and lots
of food and candy. The religious part is for most a quick flip to the early
morning program from a church somewhere in the darkest corners in Sweden where a
dressed up pastor smiles to the TV camera with dark rings under the eyes.

    Despite
the rather grey programs shown on TV with American re-runs and some really old
classics like Donald Duck and Karl-Bertil Jonsson, one get a very determined
feeling that Swedes are getting more religious these days. Is it the global
financial crisis? The dark winter? In fact, reading the local newspaper
strengthens the feeling of a more spiritual Swedish Christmas.

    People seems to
be a bit afraid of the coming 2009 and need some comfort to meet what lurks
behind the next week. I must say that I am a bit surprised, but on the other
hand, also in Indonesia
we can see that people feel a bit worried about what 2009 is going to give
them.

    2008 has
been a year with a impressive start for most people in the world. Everything
looked very positive and the expectations where only exceeded by speculations. Risks
where something most people ignored and prices on commodities raised with the
industries around it following.

    Oil barons could be seen spending large sums on
political statements and some countries really made a big fuzz over this. Then
suddenly something happened. It started as a small shake in the subprime loan
market in Midwest US. Stock exchanges tumbled,
prices on commodities dropped and suddenly the oil was dirt cheap again.

    Nothing
suddenly made sense anymore. All the theories on where the global economy was
going seemed so distant and unreal. The Chinese and Indian economical wonders
that would save the world where suddenly rather the threat to the global
economy than the savior.

    Now at the end, we all fear the worst in the coming
year. Will things turn up again? Of course it will. Will it happen soon? A lot
of governments spend a lot of money, and I mean a lot of money, to make that
happen, but it’s extremely hard to predict.

 

Note:
Everything in this news letter is written by Michael Olsson, except from the
Chairman which is written by Bengt Thornberg. The content are reflecting their views and do not represent the
Swedish Business Association nor any other of it’s members. This newsletter is
intended to give some “Swedish” reflections on Indonesia and what is going on in
the Swedish Business Community. Any comments or news are welcome to the E-mail
address: michael_olsson@bmolsson.net

 

 

 

 

 

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