Progress, with a backdrop of volcanoes
MERAPI is situated on the densely populated Indonesian island of Java and is one of the world's most active volcanoes. For several weeks, it have been spewing hot rock and ashes. It seems to serve as a metaphor for Indonesia’s continuing vulnerability even as the country seems to going on the right path toward economic and social progress.
Better financial management since the downfall of the Suharto regime in 1998 has helped half the government’s debt ratio to under 50% of GDP. As noted by a recent IMF report on May 19th, it is set to cut to 30% by 2009. This seems to be reiterated on the same day by Moody’s upgrade of the ratings for Indonesia.
Last October, president Susilo Bambang Yudhoyono made the bold move of slashing state subsidies on fuels, more than doubling their prices. Cutting them may have dampened growth and raised prices, but the IMF expects the economy ti grow by a healthy 5.2% this year and inflation to hit the bottom of its target range of 7-9%. This move has however been the cause of the fall in his popularity aong the masses along with Mr Yudhoyono's proposed reform of Indonesia's restrictive and job-killing labour laws.
Mr.Yudhoyono has resisted backlash against the fuel-subsidy cut by utilising the savings to set up a national programme of welfare payments. Even thought the scheme is the biggest of its kind in the world in the number if people it reaches, it is costing only around a quarter of the money saved from cutting subsidies. Althogh Indonesia made progress in the fuel-subsidy cut, it needs big structural reforms to free its labour market, encourage private investment and redirect government spending.
Other reforms seem to coming in place slowly – a peace deal with separatist in Aceh, Islamic terror suspect’s brought to justice, tackling corruption in public life.
Mr. Yodhoyono has up till 2009 for his reforms to show results, when he faces the voters again. He can hope to restore his popularity provided Indonesia is not thrown off-course with any other event. There are always possibilities of popular discontent, secularists-Islamist clashes, etc. Indonesia remains vulnerable to all sorts of natural disasters, from volcanoes, earthquakes and tsunamis to outbreaks of deadly diseases.
A well-governed Indonseia will be more capable of recovering for disasters – natural or man-made.