ECONOMY STILL GROWING
Eric Ellis, Jakarta
07/14/1993

WITH the March rubber-stamp installation of Suharto as President for another five years, the Indonesian strongman joins North Korea's Kim Il Sung, Zaire's Mobutu and Castro of Cuba as immovable leaders for whom the new world order is much the same as the old.
In Japan, in Italy, France and the United States, the established order that grew rotten with age has withered in the face of demands for change.

Countering Indonesian pleadings that they can't be compared to the West, the focus gets sharper still closer to Jakarta.
Among his neighbours, Suharto and his few remaining "1945 Generation" of military and political cronies have reigned the longest, closing their window to the strongest of the winds of democracy and political reform that have gusted through Taiwan, Korea, Thailand and the Philippines.

But Suharto differs markedly from his despotic colleagues in that his people have grown richer. Indonesia no longer struggles to feed its people, all 184 million of them, the world's fourth most populous state.

Once the pauper of South-East Asia, Suharto's Indonesia stands poised to become the region's newest industrialised power, particularly if its increasingly influential Minister for Research and Technology, B. J Habibie, gets his way over the "Berkeley Mafia" of technocrats who have long monopolised Suharto's economic ear.

When Suharto formally came to power in 1967 after the turmoil of the Sukarno purge, Indonesia had a gross national product per person of just$US60, and 60-70 per cent of its people lived below the poverty line. India, with six times the population, was richer.

Even in 1976, just half of Indonesians lived in what the World Bank designated developing-world poverty.

But as Suharto embarks on his sixth term as president, the percentages once designated as poor can almost be applied to an Indonesian-style middle class. (By one measure, 60,000 Indonesians have an American Express card, five times as many as 1988).

The World Bank now ranks GNP per capita at around $US600.

Year-on-year growth during the Suharto era has averaged 6 per cent, on much the same economic formula common to its ASEAN neighbours.

The target is a per capita GDP of at least $US1,000 per head by the turn of the century. The challenge is to do it in the face of competition from China and Vietnam.

The national tongue Bahasa Indonesia borrows from English the word for"recession". It's a term not much heard in Jakarta.

With another year of 6 per cent growth on the horizon, the main area of growth is expected to be in manufactured exports, in particular textiles. (Indonesia has enjoyed more than $US10 billion in textile industry investment and recently negotiated a 35 per cent increase in the US quota levels).

As it attempts to thrust its Asian credentials on a nation traditionally wary of its southern neighbour, Australia has participated in some of this growth.

But there is much room for improvement in the bilateral commercial relationship.

Despite making many of the products Indonesia buys from Japan, Taiwan and the United States, Indonesia is only Australia's 10th major market.

Australia supplies around 5 per cent of Indonesia's imports, its sixth biggest source.

Australia has traditionally enjoyed a substantial trade surplus with Indonesia, largely because there were few products Indonesia produced that Australia could use.

But the growing sophistication of the Indonesian economy, and the improvement in political relations, has been evident in the more recent trade data.

Overall two-way trade is up by 60 per cent in the past two years, with much of the growth coming from the Indonesian side. This suggests that Indonesia is a politically content archipelago of prosperous yuppies ready to chart Australian traders out of recession.

True, there are some seriously big and monopolistic businesses, most of Chinese origin, others controlled by the Suharto family and associates, but by international standards, even by Asian standards, Indonesia remains a poor country.

Australia's senior trade commissioner Barbara Higgs said: "This is a difficult market to read. There is a developing market for consumer goods and we have seen the so-called elaborately transformed manufactures sector growing quite fast."

The main theatre of Australian interest in Indonesia has been in resources and related industries - names like CRA, BHP, Dominion Mining, Ashton and Clough Engineering dominate the Australian business register.

But the make-up of the Indonesian economy is changing, away from agriculture and resources and to something which resembles a junior Taiwan.

B. J Habibie would like it to turn into a junior Korea, or Japan, with the attendant focus on heavy but hi-tech industry.

Many eyes in Jakarta are focused on the rise and rise of this close Suharto associate, a civilian who also heads the increasingly vocal League of Muslim Intellectuals.

German-educated and a one-time senior engineer at the Messerschmitt Group, Habibie would like to see a devout Indonesia launching satellites, building nuclear power plants, building ships and aeroplanes.

A recent article that suggested Indonesia should continue to focus on low-tech, low-cost manufactures drew a tart response from Mr Habibie, who said: "You have to leap ahead, how can you buy technology by making jeans, buy ships by selling fish?"

Mr Habibie's portfolio takes in the Batam Island Authority, which aims to transform a once-sleepy backwater near Singapore into a hi-tech industry park, a "Growth Triangle" linking Singapore, Indonesia and Johore Baru in Malaysia, across from Singapore.

Low-technology industries are banned, says the Habibie Ministry. Addressing new directors at a big State steel group, Mr Habibie last week reiterated his pledge to "place a strong emphasis on technology in the next years".