Indonesia: Perspectives

The particular nuances of the round-the-world plane tickets we’re using for our Investment Trek create some interesting challenges and opportunities when it comes to the actual route of the journey.  Limited stops (layovers count as stops), travel direction/progression, and airline partner groups require us to select the most direct routes, often sacrificing a potentially great stop for a more direct route.  The travel nuances are the reason I had a chance to make a quick stop in Indonesia.  Strangely (or at least I found it strange), there was not a direct flight option to Jakarta, but rather, the most direct route to Singapore was through Bali.  I would have enjoyed visiting Jakarta on this trek, but flying from Sydney through Seoul to do so just wasn’t viable… so Bali provided an abbreviated sample of Indonesia.

Even in my very brief time in Bali, I learned a lot about Indonesia and the issues it is facing.  The perspectives that follow are from my observations coupled with some outstanding country research done by Joe Dunbar.  For the in-country insights, I can thank my friendly and very talkative driver who was more than willing to opine on virtually anything I asked him.  His English was infinitely better than my Bahasa, so there could definitely be a few things that have been lost in translation.

With a population of over 250 million people, Indonesia is the fourth most populous country in the world (behind China, India, and the United States).  My trek will take me through a few countries in the Middle East, but when it comes to the highest concentration of Muslims by country, more Muslims call Indonesia home than any other nation.  Religion is ever-present and truly dictates the cultural and societal norms throughout Indonesia.  There are 17,000 islands which make up Indonesia and almost every island is Muslim.  Interestingly, Bali is one of the few islands that is predominantly Hindu in this Muslim-majority nation.  The divide along religious lines is very important in Indonesia.

Religious conflict and differences is not unique to Indonesia, but tolerance and understanding of diverse world views appear to be in relatively short supply in this island nation.  There is significant religious-centered violence, primarily between the majority Sunni Muslims and everyone else.  To curb the violence, a former minister of religion suggested that the best solution to religious intolerance would be for the minority Islamic sects and other religions to simply convert to Sunni Islam.

Bedulu Elephant Cave

Indonesia is organized in provinces, and each province has some autonomy to govern at the local level (similar to state governments in the US).  The Balinese feel like an orphan in relation to the rest of the country because of the religious divide.  According to the conversations I had, Jakarta (and the government and systems it represents) is entirely corrupt and consumes the vast majority of the tax revenue.  Given Bali’s very significant role in tourism, Jakarta makes some concessions for Bali.  A larger portion of taxes collected in Bali stay in Bali to cover more services (water, infrastructure, healthcare, etc.) than on many other islands.  As my driver friend described it, in relative terms, Bali is paradise for visitors and locals alike.

But this particular paradise isn’t without its challenges.  In addition to the religious violence, Indonesia has serious problems with environmental issues. Air and water pollution are readily apparent, even in Bali.  Indonesia holds the unenvious distinction of having the highest rate of deforestation, even higher than the Amazon forest in Brazil.  I asked my driver what the penalty was for illegal logging and he explained that sometimes people go to jail, but most just pay the judges for a reduced sentence, pay a fine (maybe), and then just continue on their way.

Another unenvious distinction held by Indonesia is the level of corruption.  Indonesia has the highest level of corruption in Asia and ranks as one of the most corrupt nations in the world.  While Jakarta represents the core of corruption, it extends across the entire country, including into the Hindu enclave of Bali.

As we drove around Bali, we were stopped four different times by make-shift police check-points in the road.  Our local driver would always say “see… police corruption” and then quickly grab a handful of cash.  They’d flag us over and the driver would subtly slip the cash into the nearest policeman’s hand.  Magically, we were told to keep going while other, less-fortunate visitors were getting the full shake-down on the side of the road.  The price of the bribe – generally around $1-3 USD.  The driver said those caught-up in the shake-down would pay $100-200 USD to eventually be allowed to move along from the impromptu check-point.  The cultural implications of corruption and bribery, however, are far more expensive to Indonesia.  Without the rule of law and confidence in the government, foreign investment will likely keep its distance.  The risk simply may not be proportionate to the potential reward.

 

Special thanks to Brennan Staheli, Joe Dunbar, and the Lunt Capital team for their contributions to this report.