Indonesia case study
Indonesia Case Discussion Questions:
1. What political factors explain Indonesia’s poor economic performance? What economic factors? Are these two related?
The major political factor affecting Indonesia’s poor economic performance is corruption. Indonesia was run by President Suharto for 30 years. Under his dictatorial rule corruption was rampant at all levels of government. While the country today is democratically run, the culture of corruption still pervades. Excessive bureaucracy coupled with low wages and high unemployment further adds to this problem. As is noted in the case study, “It takes 151 days on an average to complete paperwork necessary to start a business as opposed to 30 days in Malaysia and 8 days in Singapore.”
With so much bureaucracy, there are plenty of rank and file employees as well as high placed government officials who have their hands out for pay offs along the way. Corruption is accepted as the norm. The country is known for not being friendly to foreign companies as is noted in the article, “the police have been known to through the executives of foreign enterprise into jail” just to receive brides for their release.
2. Why do you think foreign firms exited Indonesia in the early 2000’s? What are the implications for the country? What is required to reverse the trend?
In the early 2000’s, Indonesia underwent a political transformation. After three decades of totalitarianism, a democratic government was established. With change comes uncertainty. While the previous dictator was corrupt, he had been in place for thirty years. Foreign investors knew how to navigate his corrupt system, and the government was centralized which streamlined the payoffs and kickbacks. With democracy came decentralization giving local regions more control. Corruption spread downstream. It suddenly became even more difficult to invest as many more parties, agencies, and politicians had their hand in the till. If left unchecked the implications could be a
1. What political factors explain Indonesia’s poor economic performance? What economic factors? Are these two related?
The major political factor affecting Indonesia’s poor economic performance is corruption. Indonesia was run by President Suharto for 30 years. Under his dictatorial rule corruption was rampant at all levels of government. While the country today is democratically run, the culture of corruption still pervades. Excessive bureaucracy coupled with low wages and high unemployment further adds to this problem. As is noted in the case study, “It takes 151 days on an average to complete paperwork necessary to start a business as opposed to 30 days in Malaysia and 8 days in Singapore.”
With so much bureaucracy, there are plenty of rank and file employees as well as high placed government officials who have their hands out for pay offs along the way. Corruption is accepted as the norm. The country is known for not being friendly to foreign companies as is noted in the article, “the police have been known to through the executives of foreign enterprise into jail” just to receive brides for their release.
2. Why do you think foreign firms exited Indonesia in the early 2000’s? What are the implications for the country? What is required to reverse the trend?
In the early 2000’s, Indonesia underwent a political transformation. After three decades of totalitarianism, a democratic government was established. With change comes uncertainty. While the previous dictator was corrupt, he had been in place for thirty years. Foreign investors knew how to navigate his corrupt system, and the government was centralized which streamlined the payoffs and kickbacks. With democracy came decentralization giving local regions more control. Corruption spread downstream. It suddenly became even more difficult to invest as many more parties, agencies, and politicians had their hand in the till. If left unchecked the implications could be a