Radiant Indonesia Is Powering Ahead of Some Neighbours

By W. Scott Thompson and Oliver Geronilla

We have been tracking the economic ups and downs of the Philippines, Indonesia, and Thailand. Of course we know how far Thailand has politically plummeted in the past four years — though its economy to date seems almost impervious to the unrest. But on August 6, the International Herald Tribune published a significant lead article entitled “Indonesia comes out of crisis with a golden glow.” It’s because investors who always want to find the newest rainbow are flocking here.

The Philippines and Indonesia are strikingly similar in their geography, colonial history and underlying Malay culture, not to mention the long dictatorships that both are recovering from. But in Jakarta, everyone is all ears to investors. They try to facilitate investment strategies in multiple ways and are keenly interested in the investors’ concerns. Whereas, in Manila, there’s a more insular focus on personalities, warlords and, with good reason, boxing. True, there’s the same wealth in minerals and a great advantage in English language facility. But investors just couldn’t figure out the Philippines. 

In 2008, Indonesia got almost US$15 billion FDI (foreign direct investment) — in productive investment, not from overseas workers. The second quarter this year, it attracted $3.7 billion, dwarfing receipts in the Philippines. A lot of it comes from the leadership of SBY, Susilo Bambang Yudhoyono, the reformist president now in his second term. He doesn’t just say the right thing; he points the way and has people at every level to direct the flow of FDI. He has a clear roadmap.

Can the Philippines be the next Indonesia? Why not? There’s a new reformist president with a clear vision of what the Philippines could be. President Aquino is rightly focused on cleaning things up at home.  He isn’t interested in foreign travel, certainly not for its own sake.  But at some point he might wish to look at how SBY did it. Of course P-Noy wants to find his own way. But at some point, he will want to articulate the Filipino way to greater wealth. It would start with clear goals, adding to incentives for investment in areas that bring the greatest rewards to his country. And, alas, he of course would know that it’s a buyer’s market. Indonesia is next door, so is Vietnam – and oddly, still, Thailand. 

Look at what turned investors on in Indonesia. Heads have begun to roll in SBY’s anti-corruption drive. Corruption has been, if anything, worse in Indonesia than in the Philippines, no matter the international indices. Investors aren’t moralists; they just like the clarity of a country where payouts are for materials and human capability, not payoffs for access. Indonesia has a larger domestic market, but in matters of FDI, the Philippines is plenty big. After all, the biggest recipient of FDI has always been little Singapore. 

Small wonder that in the post-dictatorship period, Indonesia shot past the Philippines in per capita income by at least 15 percent. Their roadmap shows a goal of $30-40 billion FDI by 2015. They are even trying to make it possible for investors to own land. Can you imagine that in the Philippines? The nervousness about that is understandable, but Filipinos might well remember prime minister Chachai’s comment in 1990 about vast new Japanese investment that made Thailand so much richer: “They can’t take the land to Tokyo, can they?” Indonesia pulls this off; investors will have a good-feeling psychological safety net; forget investment where it doesn’t exist in the region.

The new president has been received with great anticipation among investors, as with most Filipinos. Now a roadmap is needed. We happen to think that it’s good to spell out the enormity of the problems Mrs Arroyo left behind. There’s going to be a lot of belt-tightening before the economy can take off in a “virtuous” way, to use the economists’ term. But the groundwork has to be laid for a widescale attempt to lure FDI to the Philippine shores. Heads will have to roll, too. A commitment to infrastructural development, to educational investment and of course clean government is necessary. 

Empire-building within the administration — the only bad news so far – won’t help: investors will judge whether the team is pulling together, rather than in different directions as has happened all too often. We know that the new president is highly focused on economic issues. But foreign investment in some circles here is a bad term. There’s lots of the old Filipino First mentality left, and that’s understandable given the particular history. But Filipinos have to choose: do they want to be left behind once again, and see income slipping, relative to the rest of the region, all over again — or do they want to be at the head of the pack, bringing greater opportunities to the ninety million Filipinos? Getting rich requires a choice. Do you like to be poor — or do you want to be wealthy? Does the Philippines want to glow, like Indonesia?

W. Scott Thompson, a resident of Bali, is professor emeritus of International Politics at the Fletcher School of Law and Diplomacy, Tufts University. Oliver Geronilla is a language instructor in Cavite, Philippines.

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