Survey of recent developments in Indonesia

Crawford School of Public Policy | Arndt-Corden Department of Economics | Indonesia Project

Event details

Indonesia Study Group

Date & time

Wednesday 08 May 2013


Coombs Seminar Room B, Coombs Building, Fellows Road, ANU


Vikram Nehru (Carnegie Endowment for International Peace, Washington)


Indonesia Project
+61 2 6125 5954

Indonesia’s political parties have submitted their provisional list of candidates – the process for the 2014 parliamentary and presidential elections has finally begun. But recent events suggest that the country’s political reforms remain a work in progress. The military and the police do not appear to be fully reconciled to the rule of law. Fundamental questions about the electoral system are still being debated. And the balance of power between the executive and legislature, the centre and provinces, and the government and civil society are still being tested. It is too early to say if the slowing growth momentum towards the end of 2012 has been arrested. Exports continue to slow while imports appear stable, making it increasingly likely that the trade and current account deficits that so startled markets and policy-makers in 2012 could persist through at least the first half of 2013. In contrast, growth in foreign and domestic investment in the first quarter was strong, consumer confidence remains high, portfolio flows continue to pour in, and the stock market has recently reached record highs. On the macroeconomic policy front, the government’s dithering on raising fuel prices is exacerbating uncertainty and crowding out infrastructure investment and social expenditures. And accelerating inflation, together with large inflows of short-term capital and significant external financing requirements, poses complications for macroeconomic management. On the structural front, a recent spate of trade restrictions and new draft trade and industrial laws currently being considered by parliament potentially mark a shift towards a more interventionist and import-substitution development strategy. Targeting and financing challenges facing Indonesia’s social assistance programs are making it increasingly difficult to protect poor and vulnerable households in the face of slowing growth and rising inequality.

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