The Straits Times says

Latching on to promise of growth

Pragmatic optimism about the future ought to triumph over the unfortunate concerns of the present as Indonesia marks its 70th anniversary of independence. Understandably, a mood of mourning hangs over the celebration of a significant milestone, following the air disaster in remote Papua province that killed all 54 people on board. A currency under much pressure and economic uncertainty are also dampeners.

Yet, going by its performance in the past 20 years, it should not all be doom and gloom. Indeed, management consulting firm McKinsey had forecast in 2012 that Indonesia could become the world's seventh-largest economy in 2030 - from its 16th position now - if it lays the right foundations. After all, it has a substantial population of 250 million with a favourable demographic spread and an abundance of natural resources.

According to a March report by think-tank the Organisation for Economic Cooperation and Development, the Indonesian economy performed "exceptionally well" in the decade since the Asian financial crisis in 1997-98 through prudent macroeconomic policies and reforms. However, the same report also noted that growth has moderated in recent years, due not only to weaker international demand and slow investment growth but also to "heightened regulatory uncertainty and infrastructure bottlenecks".

Effective governance is a challenge that South-east Asia's largest economy cannot afford to ignore. The recent air crash is an example of regulatory failure, despite the aviation sector being flagged for safety lapses. Infrastructural improvements - not just in air transport but across a range of key areas - are critical if the nation is to make a leap to the next level. Critics also point to protectionist measures that have surfaced. But efforts to develop home-grown industries (a legitimate undertaking) should be separated from any moves to keep out foreign competition (an impulse antithetical to Asean common market aspirations).

It was in the hope of ushering in sound governance and market-friendly reforms that President Joko Widodo was voted into power last year. He has been held back by a sluggish bureaucracy, poor coordination between ministries, nationalistic tendencies of politicians, corruption, and resistance from his own ruling party. But there's cause for optimism that Mr Joko's reshuffle of his Cabinet last week will both appease his party and help him to get on with what he wants to do. The President also announced a budget that includes an increase in infrastructure spending by 8 per cent and called for earlier tenders of infrastructure projects to get off the ground faster.

A forward-looking approach must be coupled with broadly-held determination to lay the ground for inclusive economic and social development if Indonesia is to fulfil its ample potential.

A version of this article appeared in the print edition of The Straits Times on August 20, 2015, with the headline 'Latching on to promise of growth'. Print Edition | Subscribe