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Indonesia deteriorating

Having only recently won back favour from international rating agencies, Indonesia now seems to be going backwards.

For once, the problem is not economic mismanagement. As Michael Vatikiotis has reported recently, Indonesia’s latest problem is a surprising bout of social disorder:

Violence is increasing at an alarming rate in Indonesia. In the first four months of this year, a World Bank-sponsored monitoring system in Jakarta recorded more than 2,400 incidents that resulted in more than 300 deaths. Much of the violence is occurring in communities where local conflicts break out, often over petty issues.

Vatikiotis, who is the Asia regional director of the Centre for Humanitarian Dialogue, points to the rise of vocal extremist Islamic groups in particular and bemoans the government’s failure to enforce order and uphold the country’s existing laws.

Poorly developed legal norms and ethics are also to blame. Indonesia was in such a hurry to lift the yoke of paternalistic, heavy-handed central rule that it didn’t invest time and resources in building institutions. Without a strong foundation for regulating local democracy, provincial and district politicians consider the election process a free for all.

If this wasn’t worrying enough, there are also reports in The Jakarta Post of international companies backing out of Indonesia in response to the violence:

Indonesian Employers’ Association (Apindo) chairman Sofjan Wanandi said that one locally owned and five foreign owned companies had permanently shut down operations due to prolonged labor disputes. Four other multinational companies are expected to follow suit, Sofjan said, declining to name the firms on concerns for their bank financing.

“The estimated investment loss may just reach more than US$100 million,” he said.

The examples are sobering:

The Japanese connectivity component maker PT Japan Solderless Terminal Indonesia said it lost US$6 million between January and October after external union organizers “attacked” their factory in Cibitung, Bekasi, West Java.


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