Hope Floats

When Wall Street took a massive dive in late 2008, pundits were predicting a global financial crisis to surpass the Great Depression. The stunning effects are being felt around the world, including in Asia but, despite the challenges ahead, Indonesia appears to be doing fine. While some believe the country has managed to “dodge” the crisis, others warn of the sobering realities that may lie ahead. Maggie Tiojakin reports.

A visiting Eastern European tourist puts happening Jakarta almost on par with New York, Tokyo, London, Singapore and Paris before the crisis hit, with consumerism the designated brand of personality and money spinning here, there and everywhere. She marvels at the ease with which local shoppers spend hundreds, even thousands, of dollars on branded items in the midst of the global crisis.

“It’s unbelievable!” she says, strolling through a shopping mall downtown and gesturing toward luxury stores. “[Indonesians] must either be obscenely rich, or sadly in denial – or crazy.”

Or all three.

When most urban dwellers in other parts of the world are tightening their belts, Jakartans appear to have never had it so good. Larger-than-life entertainment venues are in the offing, complete with upmarket boutiques, restaurants and clubs.

North Jakarta’s Mal Kelapa Gading (MKG) is one example. Spanning 42,000 square feet and boasting 600+ retail stores, the mall draws thousands of visitors who take their pick of groceries, clothing, jewelry, entertainment and restaurants. On weekends, there are promotional events geared to bringing in the crowds and, often, the lure of out-of-season sales. It’s a brilliant counterstrike against what economists dub “the worst recession of the 21st century” by refusing to kowtow to all the talk of gloom and doom.

“I don’t want to take lightly all the things that have been happening,” says Willem Prastadi, the co-owner of a home appliance store at MKG. “Still, I don’t think we should panic just yet; it’s better for us to be smart about [the crisis].”

Willem claims sales at his store have been unaffected and he says April was “wonderful for business”. Indeed, the market’s growing interest in real estate provides a generous profit boost for home appliance outlets: Every wall needs to be painted or papered, floor to be tiled, and so on

Nevertheless, he adds, good business does not automatically imply lack of complaints about inevitable price hikes. Industrial goods and supplies – especially raw materials – were some of the first to double in price; this stems from the explosion of global commodity prices (food and oil), which dealt heavy blows to the economy.

“[The price of] everything has gone way up,” says Willem. “Generally, we’d be looking at a long and dark tunnel – not this time, though. I don’t know what it is, but I have a feeling we’re going to be OK.”

It’s an allusion to the Southeast Asian financial crisis in 1997, in which Indonesia fared the worst among its neighbors, with banks folding, the rupiah tumbling and widespread public dissent that led to the toppling of then president Soeharto. It took almost a full decade for Indonesia to revitalize its financial sector, during which the nation’s economy had to undergo a massive transformation.

But some caution that there is no room for complacency, because the regional crisis 12 years ago is no measure of how Indonesia will cope with the far-reaching one of today.

“What we’re seeing now has little resemblance to the 1997 crisis,” says Adrianto Murwin, a contributor to a business journal based in Jakarta. “We have no way of determining how far this crisis is going to extend itself, because we’re right in the middle of it. Officially, we have entered the first quarter of the crisis [since December 2008], which means in the next couple of months we’ll be expecting some turbulence. I’m not so confident of the outcome, and I would tell people to err on the side of caution.”

In February, with the nation’s attention firmly focused on the April legislative election, the National Bureau of Statistics released data showing a rise in consumer confidence. Subsequently, Tempo magazine ran a short piece questioning the data’s validity and asking the government to clarify the matter by providing more accurate readings on the state of the economy. Hendri Saparini, director of Econit Advisory Group, was quoted in the piece as saying, “Releasing the wrong data will create more pitfalls to the economy.”

The bottom line is that some people are still spending – big: whether it’s the new pair of Jimmy Choos, a sports car, or a villa in that new, swanky neighborhood – and some are beginning to wonder if the crisis is real. Others, however, notice warning signs. The director of a towering mall in South Jakarta says business has slowed.

“People aren’t going out as much, maybe once or twice a week instead of four or five times. We had lots of people for the opening of a club on our premises, the place was packed, but it hasn’t been the same since.”

“Obviously, there is a crisis,” says Tirwan Anuli, an event organizer who recently became the proud owner of a Blackberry, the latest must-have gadget. “I mean, there has to be – because I don’t remember a time when I had to spend $5 on a cup of coffee; or $40 on lunch. That’s ridiculous, right?” He laughs. “But it is what it is, and you have to roll with it.”

As someone who earns more than Rp 10 million (about US$1,000) a month, a relatively high salary by Indonesian standards, Tirwan’s assessment of the economy may seem to some as nonchalant. For those who make their living in and around the capital city, the crisis appears and disappears like a bobbing buoy in the middle of a sweeping tsunami: Sometimes it’s there, sometimes it’s not.

And hope floats.

Nations once revered as the backbone of the global financial system are now scraping for leftover funds to cover enormous losses from recession: A 2009 economic map charted by the International Monetary Fund (IMF) shows 70 percent of the world’s region painted in five varying shades of red indicating how badly each region is affected by the crisis. North America and Western Europe, the leaders among industrialized countries, are shown in an ominously blood-like crimson. Indonesia – along with some parts of South America – is one of the very few nations to suffer a less than 0.5 percent economic slowdown (colored in light pink), although it would be better to be in blue (signifying an economic acceleration), which is mainly in the Middle East.

“I can’t say we’re being blasé about the whole thing,” says Nidina Ismail, a marketing manager at a record company. “Let’s face it: We’re not exactly experiencing a cash overflow. But I’d like to think we’re doing better than others, because so far (a) I still have my job and (b) the only thing I have to sacrifice is 10 percent of my sales bonuses.”

“Ika” disagrees. A branch manager at one of the largest public banks in the country, she has made it her personal mission to warn her clients of the crisis.

“The problem is people are so used to reacting to, rather than preventing problems from happening,” says Ika. “I’ve had clients come to me with the idea that the crisis is happening somewhere else, as if they were immune to it. Let me tell you now: we’re not immune to it – and it will hit us when we least expect it.”

Even so, several advertorials in local papers are admonishing any signs of an impending recession. “This is the perfect time to invest,” says one advertorial. “It’s a great opportunity to earn real money.”

Elsewhere, the advertorial shout may suffer a backlash from a population already weakened by the soaring prices of consumer goods. In Bangka-Belitung province, for instance, the crisis is no more news than a dilemma, following last year’s dramatic increase in food prices.

Raniarti Wijaya, who makes her living selling the province’s traditional dishes of empek-empek and otak-otak (fish cakes), used to sell between 50 and 100 bowls a day. Now, she feels lucky if she can produce half that amount, considering the expense of purchasing fish and eggs.

“Business has been awful in the last six months,” says Raniarti over the phone. “I can’t get customers if I don’t have the products to sell, and even if I do manage to have 50 plates ready, there’s no guarantee I’ll get enough customers.”

Meanwhile, in the regency of Bogor, the situation is no less devastating.

Yumi Dawarman is a 36-year-old mother of three who, for 10 years, has been operating a small café on Jalan Salak. In a good month, she earns a net profit of around Rp 30 million; in a slow month, one-third of that. The past two months have generated a mere fraction of what she usually earns in a slower period. She attributes the loss to fancier competitors and a slumping economy.

“There is nothing I can do except wait for the economy to get better,” says Yumi, hopeful. “I can hold out for six to seven months in this climate, but not a day more.”

With more than 2 million jobs at stake, thousands of homeowners facing foreclosure and the US government concocting an $825 billion stimulus plan to defray, and thus revive, the nation’s dying market, there is little doubt that America is where the storm has hit the hardest. Nancy Gibbs, a senior editor at Time magazine, illustrates the change in the US financial landscape by noting the many ways Americans are coping with the new reality of joblessness and thrift-spending (America Becomes Thrift Nation, April 2009) through 17 real-life stories collected by the magazine staff from “every corner of the country”. Gibbs calls this period the “Great Recession”.

Compared with the bleak picture depicted in Gibbs’s editorial, Indonesians have every right to count their blessings. The country may not be at the apex of prosperity, but all things considered, having a decent job (albeit with smaller bonuses) and the ability to spend $300 on a leather handbag while the rest of the world is suffering a credit crunch is rather impressive, to say the least.

But, as Livia, an outside observer who is looking at what is happening around the world, puts it, “You better hope none of this is going to come back and bite you.”

Dodge the crisis? What crisis?

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