What we can learn from Indonesia
By Mohamed Guleid
| May 9th 2016
An Indonesian I met on the street asked me curiously where I came from. "Kenya!" I answered proudly. "Is that Africa?" he asked. "Yes," I said with a grin hoping he had figured out where Kenya was on the map. Then he asked rather sheepishly: "Is Kenya in Mogadishu," my heart sunk. Mogadishu seems better known than Nairobi at least by my newly found acquaintance. With two other Kenyans, we visited Indonesia's capital last week to learn what drives the economy of one of East Asia Pacific's economic powerhouses.
Indonesia ranks 50th in the World Economic Forum's Global Competitiveness Index; its economy worth $888.5 billion according to World Bank, is already the 16th largest in the world. Some economists argue that it could pass Germany and the United Kingdom to become the 7th largest economy by 2030. In 2016, the World Bank forecasts that Indonesia's economy will grow by 5.3 per cent; life expectancy in 2014 was 69 years; it has a GNI index of $3,630 and primary school enrolment rate of 106 per cent. It is rated as one of the world's emerging economies; it is a member of the G-20 major economies. Some of its major exports include oil and gas, cement, food, textiles and rubber.
Yet by any standard, Indonesia is still a developing country when internationally acceptable indicators are used to determine the quality of life across the whole archipelago. Over 50 per cent of the people survive on less than two dollars a day. With 254 million souls packed into more than 13,000 islands, infrastructural challenges remain one of the main spoilers of Indonesia's economic bonanza.
The Jakarta metropolitan area alone has a population almost the size of Kenya's. In planning, Indonesia's capital would put to shame our Nairobi city. The skyline of the city is no different from any of the major world metropolis like London, New York or Toronto. There are more than 2,000 gigantic departmental stores. One of my travelling partner quipped. "We should never call our malls, by that name any more. They are not," she said comparing Nairobi's shopping malls to the big malls in Jakarta.
The consumer appetite can be seen from how multitudes of people throng the shopping malls ready to spend. One single mall we visited in central Jakarta had more retail outlets than the whole of Nairobi's Westlands.
Yet despite the rosy picture, Indonesia has challenges like Kenya that hobbles its economic growth. News in the local media feature rampant corruption and threats of radicalism from extremist groups. Traffic congestion is a problem and just like Nairobi, noise and environmental pollution remains a huge challenge. The country also exports most of its raw materials unprocessed denying it benefits from value addition. But the potential outweighs the weakness. Indonesia's population is mostly young people. This is for most investors an attraction because of the access to a large market twice the size of the whole of the East African Community.
Many multinational companies have set up shop in the country encouraged by the relatively free market environment and political stability. The people are hardworking and polite. But the success in economic growth in Indonesia is not due to foreign investments alone. The Indonesians themselves appear quite enterprising. The government especially under former President Suharto despite being a dictator, created the enabling environment for the growth the country enjoys today. The participation in the labour force by women despite being a majority Muslim nation is an indicator of a country prepared for an economic miracle.
The lesson for Kenya is the need to interrogate the causality and linkages between high population growth and development. Development economists and population experts have for decades encouraged low population growth in Africa. The effect of explosive population in South East Asia has never been a problem for economic growth. To the contrary, it has created a huge consumer society which essentially spurs growth. Look at China, India and now Indonesia.
For Kenya, we need to clearly understand what the main drivers of the economy are. We also still export most of our natural resources in raw form. How we deal with corruption and governance are obviously some of the key factors that inspire or demotivates foreign investors. Kenya has a huge and untapped human resource mostly young and well educated.
Some of the major spoilers of Kenya's economic growth other than corruption include infrastructure and constant political bickering. A healthy Opposition is good for the country, but we also need a government and opposition that regularly discuss ways of addressing our challenges. With the election season around the corner, political rhetoric will certainly hit a crescendo soon and crowd out the economic narrative.
It is up to the leadership of the country both in government and the Opposition to tone down the rhetoric.
Back to my Indonesian friend, I learnt from him that many Kenyans come to Indonesia to participate in athletics competitions. At least there is something we are doing right that others have noticed. How about investing in hosting and thereby creating an economic cluster around these events?
We have the natural resource in talent, the climate and the terrain, and what's more, sports has a unifying effect and as we have seen, it pays handsomely.
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