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Indonesia's economy: The threat of short-termism
Consumers have been sacrificed to accelerate economic reform.
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A street busker performs in front of a stall selling colorful plastic wind spinners at a traditional market in Depok, West Java. (JP/Ricky Yudhistira)
R
eversing the Dutch disease is never an easy job for any government in the world. Not only does it involve broad structural reform but it is also difficult to be a patient and long-term minded government.
To take the path of reform is always arduous especially for a commodity addict like Indonesia. The negative income effect from lower commodity prices usually lingers for some time until the production capacity built during a previous commodity boom is downsized to meet weaker demand.
The downward adjustment is usually longer and more harmful if the government represses consumers further to support massive infrastructure spending.
What President Joko “Jokowi” Widodo’s administration has been doing since 2014 shows that structural reforms can only be executed gradually. After four years, Indonesia’s infrastructure is still catching up after the nation’s lost decades.
