Indonesia changing quickly as economy booms

BBC News, By Karishma Vaswani, Jakarta, 12 June 2011

Jakarta has changed much as the Indonesian economy has surged,
creating a city of glass and steel

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• Indonesian growth at 6-year high

It is a Wednesday evening and the skyscraper in downtown Jakarta is quiet.

Most of the people who work here have already left for the day - but for the staff at Indonesian internet firm Koprol, the work continues.

Except that it is not all work. A group of twenty-somethings are mucking about on the Nintendo Wii console, enjoying a game of virtual tennis.

It could be an office in Silicon Valley - but this is Jakarta. Most of the people who work at Koprol are below the age of 30, and for many, this is their first job.

They are the new faces of Indonesia's economy.

'Good time'

Koprol, now owned by Yahoo,
tracks your location and
helps you find your friends

Koprol itself is an Indonesian success story.

The social media firm, which allows users to find people who are online and have checked in at the same location, became so popular that it caught the attention of US internet giant Yahoo - who bought Koprol last year.

It was the first Indonesian tech firm to be bought out by a foreign company.

"It's exciting," says Koprol's co-founder Satya Witoelar. "It's a good time to be in Indonesia and an Indonesian."

Indonesia's economy is now one of the best performing in the region - posting more than 6% growth at a time when the US and Europe are struggling.

Foreign investors are now looking at Indonesia carefully, eager to capitalise on the strong growth in the country. Indonesia's stock markets have also been beneficiaries of this new-found confidence, seeing a dramatic rise in the last year.

Pariah state

Looking around the main boulevard in Jakarta's financial district today, it is hard to believe that at one time in this country's history soldiers in their tanks stood on these streets and shot at student protesters demanding democracy.

Today, all you can see are the symbols of Indonesia's success - a gigantic Louis Vuitton sign plastered on one of Jakarta's sprawling mega-malls, and brand new Mercedes and BMWs parked outside some of the finest hotels in the country.

But behind this new image, the country is still dealing with age old problems.

Just over a decade ago Indonesia's economy virtually collapsed during the Asian financial crisis. The value of the rupiah plummeted, property prices dropped, and millions of Indonesians saw their wealth erode overnight.

That, and a growing discontent with the former President Suharto's authoritarian regime, led to Indonesia moving to a democracy from the dictatorship it had been for more than 30 years.

Civil unrest erupted and Indonesia saw a series of terror attacks from Islamic extremist groups. The country was pretty much written off by foreign investors, and most thought Indonesia would end up as a pariah state.

"When I first started this business with my friends, in order to register the company I had to go through a lot of steps, a lot of procedures", Mr Witoelar says.

"And, yes, there were times we had to pay money - sometimes they were for legitimate reasons, at other times they weren't. But I'm Indonesian, and I'm used to it. It's always been this way."

Corruption

Corruption and red tape still affect Indonesia and cost the economy millions every year.

President Susilo Bambang Yudhoyono was first elected on promises to tackle graft - but the latest figures in Transparency International's Corruption Perception Index are not particularly encouraging about the progress he has made.

The index shows that Indonesia scored 2.8 out of 10 - the same as in 2009 when he was re-elected.

One of the worst affected areas by these twin problems is infrastructure. Indonesia desperately needs more roads, ports and highways to see its economy reach its full potential.

Work on a bridge to link the Java and Sumatra islands, worth almost $20bn (£12.3bn), is supposed to start this year - but the plans have been stuck at the feasibility stage for years.

Then there's the failed Jakarta urban monorail system - which was supposed to be built back in 2004, but was abandoned because of legal issues and funding difficulties. All that's left of the project are cement blocks, standing forlornly along one of Jakarta's main roads.

'Unrealistic'

The government acknowledges that corruption and red tape make it tough for Indonesia to compete in the region, but says it's a work in progress.

Car sales, seen as an indicator of consumer
demand, were up in 2010

Gita Wirjawan is the man in charge of attracting foreign investment to Indonesia.

"We've increased foreign direct investment in to Indonesia by 60% in the last year alone," he says.

"It took Hong Kong more than 30 years to stamp out corruption. It is unrealistic to think that Indonesia can do it in three to six months. We have put hundreds of corrupt people behind bars."

But that progress may not be good enough to give millions of young Indonesians a chance to better their lives.

Poverty

Government estimates show that around 13% of Indonesians live under the poverty line but independent economists say its much more than that.

Many come of the country's rural poor come to Jakarta in the hopes of finding work in a factory, or a construction site - but there just aren't enough being built to provide employment to Indonesia's youth.

For instance, one of these poor rural workers, called Suparman, came to Jakarta two weeks ago from Central Java, to find work building roads.

He was rummaging through a dump near train tracks in Jakarta, sifting through plastic bottles and old DVDs, looking for anything he might be able to sell. He says he wants to start a family but can't provide for them doing this work.

Indonesia may be one of the region's fastest growing economies but it is still struggling to fix problems with corruption and red tape from the past.