Notes from the field: Jakarta, June 8th, 2009

Recession? What recession? As the rest of South-east Asia struggles to find its feet, Indonesia seems to have barely noticed—I spent the past week in Jakarta struggling to find any signs of a slowdown.

(Most) Malls are busy, restaurants are full, and businessmen are bullish. Even the hard numbers look good. The economy grew at 4.4% year on year in the first quarter this year, buoyed by strong private consumption.

Much of this probably stemmed from spending related to April’s legislative elections, as 171m voters on some 900 inhabited islands chose from 1.6m candidates from 38 national parties. It was a peaceful, carnival-like exercise that is testament to how much Indonesia’s democracy has matured—it was only 11 years ago that authoritarian rule came to an end, amidst a catastrophic recession.

Still, some of the election results are being disputed; I noticed that the Elections Commission still has heavy barbed wire right across the front of its compound, lest some unhappy candidate tries to steamroll his Toyota Astra over it. But by and large, the confetti, banners and pamphlets associated with the legislative candidates have now smoothly given way to those of the presidential candidates, who are competing furiously ahead of the July 8th elections.

Giant billboards of incumbent Susilo Bambang Yudhoyono (SBY), and his running mate, ex-central bank governor Boediono, greeted me as I entered the city. SBY’s campaign slogan, unlike the man himself, is short and simple—Lanjutkan, “Let’s continue”. At least in Jakarta, most people I met expect SBY to be reelected handsomely, if not in July, then surely in the run-off in September. And why not? Indonesia has progressed well these past five years.

Maybe not quickly enough, say SBY’s critics. Foremost amongst them is the incumbent vice-president, Jusuf Kalla, whose own presidential campaign slogan says it all: Lebih cepat, lebih baik, “The faster, the better”.

Many people I spoke with discounted the chances of the third candidate, former president Megawati, who is running on a nationalistic platform, promising to spur the growth of, amongst other things, the agriculture industry. She will probably garner some rural votes, but appears to have few friends in Jakarta. “It is unconscionable that somebody with so much blood on his hands might actually be in high office,” says one senior executive I met, referring to Megawati’s running-mate, Prabowo Subianto, known by some as ‘The Butcher of East Timor’.

But are voters buying into a sustainable economic recovery? There is concern that once the impact of all that earlier election spending fades, the economy will start to sink.

Not a chance, say those running companies continuing to grow and profit from expanding domestic consumption. The boss of a Rp. 1trillion (US$100m) food business in Indonesia told me that he enjoyed 27% top-line growth in the first 5 months of this year. Part of that was due to price increases; volume was up by a more modest 12%. The (unfortunate) kicker is that because of rising raw material prices and the depressed rupiah, costs have gone up dramatically, and thus year-on-year profits have fallen. Still, he intends to achieve similar growth in the next two years, even as costs are coming down and the rupiah is strengthening. According to him, his company’s prospects have never been better.

An apparel maker I met was similarly delighted with his company’s first quarter performance, with top-line growing by 13% year on year. However, it has achieved only single-digit volume growth, as the average selling price of his product has gone up. This is only partly due to inflation—“We divide our products into four price/value segments. What we’ve seen is declines in the highest price bracket and the lowest price bracket. The two brackets in the middle, however, have been growing strongly.” Having heard a similar story from another FMCG company, it appears as if this ability to catch consumers on their way up and down is proving especially important in this slowdown.

Domestic construction is still growing strongly, according to Achmad Widjaya, chairman of ASAKI (the Ceramics Industry of Indonesia). The domestic ceramics industry is worth around Rp. 15 trillion (US$1.5bn); most of its output flows into the construction industry, in the shape of, for example, tiles and wall panels. Although growing well domestically, exports, worth around US$300m annually, have suffered, particularly to the US and EU. Few ceramics companies expect those two markets to pick up anytime soon. As such, they are retooling some production to cater to the booming domestic market, as well as newer export markets, including places like Cambodia, Myanmar and Sri Lanka (some of these markets like tiles of a different size and quality).

Indonesia’s domestic market does have problems: for one, unemployment. Mr Widjaya says that some export-oriented companies in his industry, which employs 1m workers directly and another 5m in ancillary sectors, have had to shorten their work week to three days. Other export industries, like textiles and wood products, might need to downsize as well. Hang on—isn’t it difficult to fire workers in Indonesia, in part because of the high severance payments? Not really—one executive I spoke with said that companies have gotten around the onerous labour laws by using a large proportion of contract workers. The EIU expects unemployment in Indonesia to surge past 10% this year; even if it hasn’t shown up yet, this will crimp consumer spending in the months ahead.

Other operating environment difficulties that were repeated to me include all the usual suspects: regulatory and legal uncertainty (including new licensing requirements), corruption, complicated tax structures, and the fat bureaucracy—sure enough, I met an old-school Indonesian businessman involved in timber exports, who repeated the old mantra that, “Things were much more straightforward in the Suharto days”.

Finally, we’ve long spoken about the risk of protectionism, and in Indonesia, it is a reality. Aside from a slew of new import and export regulations, one can see long, beautiful banners strewn across highway toll booths, proclaiming, “Love Indonesian Products”. (SBY claims it’s not a protectionist campaign. Right.)

All that said, Indonesia appears to be moving along well. Relative political stability, a huge domestic market, an increasingly confident population, even some small efficiency gains—when I landed last week, I was amazed at how quickly I got from my airplane seat to the curbside. And, as the rest of the world worries about deflation, the IMF recently advised Indonesia to keep inflation in check.

Indonesia is well positioned to come out of this “crisis” as one of the emerging world’s stars. In fact, given Russia’s medium-term economic challenges—including the need to diversify away from its dependence on hydrocarbons, and adverse demographic projections—we might soon see a change in the BRIC grouping of countries. Boot Russia out, push Indonesia in. BICI, anyone?

Many have and will continue to debate the nuances of US president Barack Obama’s speech at Cairo University on Thursday. The critics will continue to be harsh, and supporters overly kind toward its merits. Its substance will be analyzed, its ramifications deliberated. Despite a breathtaking delivery, however it was by no means a perfect speech.

Nevertheless, the value of Obama’s speech may not be in the what he did or didn’t say, but in the intent of its delivery. Here was a man representing the world’s greatest power of the last century, extending a public hand of friendship, peace and conciliation to a civilization long erroneously perceived with suspicion, derision and perceptions of backwardness by the West.

As Obama pointed out, many people in the West forget (or fail to realize) it was Islamic civilization that served as a bridge between the founding sciences of the ancient Greeks and the renaissance of the “West”.

What Obama did was to take account of history and place it in its proper context, as well as acknowledging and reconciling mutual faults without the mistake of contradicting the past and the present at the expense of the future.

His speech is no doorway to a new world of love and understanding, but it is certainly a marker for a new beginning; one which Obama says is based on mutual interest and mutual respect, “based upon the truth that America and Islam are not exclusive and need not be in competition”.

At risk of pointing fingers, we cannot help but wonder if his speech is as poignant to a Muslim audience as it is to an American one.

When he declared that “Islam is not part of the problem in combating violent extremism, it is an important part of promoting peace,” we hope such words resound as piercingly throughout the plains of North America as it does in the domes of a million mosques.

As Hillary Clinton and John McCain learned, one cannot argue with hope. Hence, while there are still a great many fine points and pledges to realize from Obama’s speech, he has injected fresh hope that rational dialog of civilizations is on the horizon.

Paradoxically, Obama has also raised expectations even further, by claiming that creating world peace will take much hard work, patience and persistence from all religions, ideologies and political entities.

Even Obama acknowledged the long road ahead when he said “no single speech can eradicate years of mistrust”.

The seven points raised in Obama’s speech may be partially or wholly appealing. Some points, arguably, are infused with American foreign policy self-interest.

But in what we hope to be the earliest dawn of a new era, this matters not. Let the diplomats and politicians sort the details out with their policy chess games. What is important is that there is a common desire for nuanced understanding.

The door is open, and a friendly hand stretched out. It is up to us all to realize the dream. If America often lauds itself as a place where dreams come true, then the Middle East has certainly been a graveyard of recurring nightmares. It will be up to Obama’s America, the Middle Eastern community and the Muslim world to realize which outcome will materialize.

“Words alone cannot meet the needs of our people. These needs will be met only if we act boldly in the years ahead.”

DI NEGARAmaju,e-mailsudah menjadi identitas digital seperti halnya nomor ponsel.Surat elektronik itu dicek pada pagi dan malam sebelum tidur,di kantor saat bekerja,di laptop,PC,juga melalui ponsel.

JAKARTA: Sikap keras PT Perusahaan Gas Negara Tbk (PGN) yang tidak mau merespons permintaan negosiasi harga gas secara business to business (B-to-B) membuat industri keramik nasional semakin kesulitan bertahan di tengah krisis ekonomi global.

Kalangan industri keramik menilai sikap PGN tersebut menunjukkan arogansi dan ketidakpedulian badan usaha milik negara (BUMN) tersebut terhadap industri keramik yang merupakan konsumen terbesar pemakai gas. (more…)