19 March 2019
President Joko Widodo.sidestepped the worst effects of the mining meltdown by expanding manufacturing and ramping up infrastructure spending. Photo: Bloomberg
President Joko Widodo.sidestepped the worst effects of the mining meltdown by expanding manufacturing and ramping up infrastructure spending. Photo: Bloomberg

How Indonesia escaped the worst of China’s slowdown

With Mitsubishi Corp. becoming the latest player looking to quit a major mining project, Indonesia would seem to be a victim of the great commodity crash.

Newmont Corp. and BHP Billiton Ltd., two of the world’s largest mines, have already announced plans to exit the Southeast Asian country.

But Indonesia is doing just fine, thank you.

Bloomberg is reporting that Indonesia has dodged the bullet that struck Brazil, Russia, Venezuela and others as China’s growth slowed and the global resources boom waned.

While many of its rivals have slid into recession, the archipelago of 17,000 islands — China’s biggest supplier of power-station coal and a major producer of tin, copper, nickel, palm oil and natural gas — has managed to keep growth ticking along at around 5 percent.

“We are not Brazil,” Finance Minister Bambang Brodjonegoro told a recent media gathering.

“We have diversified our economy more compared with other countries,” Brodjonegoro said in an interview this week.

“Growth has remained good and not really ugly. In general, we can be an emerging economy showing a different color to other emerging nations due to the effect of lower commodity prices.”

Government reform has helped attract investment and Indonesia has sidestepped the worst effects of the mineral meltdown via its history of self-sufficiency, a government bent on expanding manufacturing, and a jump in infrastructure spending by President Joko Widodo.

Jokowi, as the former Jakarta governor is known, doesn’t come from Indonesia’s tight-knit political elite, rising to power in a groundswell of popular support from the country’s poor.

Yet, he has managed to subdue his opponents in the past year and avoid the corruption scandals and infighting that have dogged his counterparts in Brasilia and Johannesburg.

That has enabled him to focus on improving the country’s wretched transport networks and curb the bureaucracy that discouraged investment.

As nations across the Americas, Europe and Asia grapple with political and social upheaval, Jokowi is even selling Indonesia, a nation with a history of military rule, as a haven of stability.

“It is clear that the world is currently facing a lot of challenges, starting from the economic transition in China, social and security challenges in Europe to the economic slowdown in various countries,” Jokowi told businessmen during a trip to London in April.

“The solution is simple: keep calm and invest in Indonesia.”

During that UK visit, Jokowi attended the signing of US$19 billion in deals, including with the Jardine Matheson Group, Rolls-Royce Holdings Plc. and HSBC Holdings Plc.

Indonesia’s foreign direct investment rose 3 percent last year in dollar terms to a record $29 billion.

Only 3 percent of Indonesia’s total FDI was in mining last quarter, compared with 17 percent in 2013. The lion’s share — 78 percent — was in manufacturing, up from 55 percent in 2013.

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