By Dave Hendrick
In the wake of the Asia monetary crisis of 1997, Indonesia — riven by social unrest and a collapsing economy — was on the brink of disintegration.
In 2019, the sprawling archipelago — the world’s fourth most populous country — has a solidifying role as a global economic powerhouse and recently completed a democratic presidential election with 81 percent turnout.
The turnaround, according to Mahendra Siregar, ambassador of Indonesia to the United States, qualifies as “beyond mission impossible.”
Instead of collapsing into dozens of individual countries, the 17,000-island nation remained intact and managed to effectively restructure its debt, economy and political system.
“Crisis is always the best time for reform,” Siregar said.
Speaking at the University of Virginia Darden School of Business at a Leadership Speaker Series address, Siregar offered a snapshot of the state of the ascendant country, with an economy growing at more than 5 percent a year and declining poverty and low unemployment.
The country is investing heavily to sustain its momentum, Siregar said, focusing its budget on education, infrastructure and health initiatives and promoting innovation as a means to grow the economy. He said if economic progress continues apace, the country may be the world’s fourth largest economy by 2045.
The Darden School has an enduring relationship with Indonesia, with an active base of alumni in Jakarta.
Among its suite of scholarships, Darden offers the Indonesia Fellowship, a full scholarship covering the cost of attendance for an academically qualified Indonesian national with proven need for financial support. The scholarship may be used for either Darden’s full-time MBA or Executive MBA program.
Siregar, who during his visit met with Indonesian students and faculty at UVA, hosted a lunch for scholars interested in the region and discussed with UVA leadership opportunities for collaboration between UVA and Indonesian universities and businesses.
At present, Siregar suggested viewing Indonesia within the context of the “integrated region” of the Association of Southeast Asian Nations (ASEAN), a regional alliance comprised of 10 countries in Southeast Asia, which taken together represents the fifth largest economy in the world with a GDP of $2.8 trillion.
The region represents the U.S.’s fourth largest export market, after Canada, Mexico and China, Siregar said, with interconnected economic links in a variety of sectors, from agriculture to tourism.
Given its location and strategic importance, the country has a unique vantage point to the U.S.-China trade war, Siregar said.
The ambassador said that, although the current trade disagreements were casting a shadow over the global economy, the U.S. was making important efforts to challenge an export-oriented economy whose industry is heavily subsidized and relies on a devalued currency.
“This is not so much a criticism, because it has been an integral part of the policy of China’s development, but it places a considerable burden on trading partners whose industrial base is based on free and fair conditions,” Siregar said. “Indonesia is not immune to these problems, as Indonesia has been experiencing structural trade deficits with China for the last 30 years.”
Siregar said current multilateral World Trade Organization trade rules had proven to be ineffective, and predicted the sort of bilateral negotiations currently on display between the U.S. and China would increasingly be the norm as countries prioritized national interest.
It was now “unrealistic” to expect the WTO rule-based system could restore imbalances in the global trading system, Siregar said.
While ASEAN is not publicly taking sides in the trade war, and both the U.S. and China are critical trading partners, the ambassador noted the lack of “unity of purpose” among member nations, given the wide variation in economies among the countries.
For Indonesia to lay the groundwork for future cooperation and economic opportunity with both countries, it must be seen as a strategic partner for the U.S. and China, Siregar said, and is mindful to not back one side.
Noting the remarkable path Indonesia had taken from the brink of collapse in little more than two decades, Siregar said uncertainty about the state of the global economy and alliances could also pave the way for a more durable future.
“When people share their worries about current global trade and the economic, political and geopolitical situation and say, ‘This is the end of the world,’ well, obviously, you are sharing a pessimistic view,” said Siregar. “If you are sharing an optimistic view, there has never been a better time like this to reform the global governments. It’s up to you to decide.”
Watch Siregar’s Full Leadership Speaker Series Address at UVA Darden
About the University of Virginia Darden School of Business
The University of Virginia Darden School of Business delivers the world’s best business education experience to prepare entrepreneurial, global and responsible leaders through its MBA, Ph.D., MSBA and Executive Education programs. Darden’s top-ranked faculty is renowned for teaching excellence and advances practical business knowledge through research. Darden was established in 1955 at the University of Virginia, a top public university founded by Thomas Jefferson in 1819 in Charlottesville, Virginia.