Another year of economic growth, but whom has it benefited?

Debnath Guharoy, Consultant

In a few days from now, Indonesia will be celebrating another year of independence. There are reasons for every citizen to feel good. Around four out of five people believe that "democracy is working" and three out of four are confident of the country's economic future.

Almost 60 percent believe the administration "is doing a good job of running the country" and only 30 percent "don't trust this government". By any standard, an economy growing at 6 percent per annum is doing well.

So where's the problem? In a country rich in mineral wealth, much of this economic well-being is being driven by exports from the mining and energy sector.

Most new investments, in terms of value at least, are in natural resources. Capital-intensive but not labor-intensive, wealth is accruing in even larger measures in the coffers of the select few.

The rich are getting richer. There is nothing wrong with that, except for the fact that only 3 percent of the population has any real disposable income by international standards. While the middle class is comfortable, consumer confidence has dipped across the country. There are no signs of alleviation for the pain the poor of Indonesia continue to live with, every day. "The gap between rich and poor is widening", say four out of five people. This is a perception shared by all levels of society, rich and poor, young and old, urban and rural.

These findings are from Roy Morgan Single Source, the country's largest syndicated survey with over 27,000 Indonesian respondents annually, projected to reflect 90 percent of the population over the age of 14. That is a universe of 140 million people. The results are updated every 90 days.

In the court of public opinion, all is far from well. This is in sharp contrast to the upbeat conversations you might have with an investment banker, fund manager or senior bureaucrat.

Financial intentions, key indicators of the public pulse are all steadily headed downwards. For example, some 21 million people were planning to open a bank account three years ago. Now that's down to less than 14 million, highlighting a significant decline not only in Indonesia's ability to save, but the ability to participate in the economic mainstream.

As many as 3.5 million people were planning to build or buy a home three years ago. Now that's down to 2.2 million. The aspirations of over a million families have been erased and with them, gainful employment for millions more in the home-building industry. But most worrying of all the indicators is the decline in small business intentions. Some 11 million people were planning to open a small business three years go. The overwhelming majority would have been very small businesses indeed. But like in any country, it is these small businesses in their thousands and millions that form the backbone of the economy. They create more jobs than any other sector of the economy.

The will of the individual to carve out a living, to build a future, is on the decline. The number of budding entrepreneurs, no matter how humble the enterprise, has shrunk to just 4 million today.

Whether those resolute 4 million make it or not is another question altogether. Much will depend on the actions taken by Indonesia's banking sector. That Nobel laureate Mohamed Yunus was in Jakarta last week is a good sign, but actions will need to speak louder than words if the small business sector is going to be an economic engine.

Developing small business is even more important today, as the battle for a share of global investment dollars and foreign direct investment has intensified even in the last five years, in favor of China, India and even Vietnam.

While Indonesia's resources sector continues to attract investment from both within and overseas, any significant surge in employment opportunities or better wages isn't likely in the near term.

Can corporations play a role? Can companies work in partnership with Indonesia's banks to mutual gain? If new business plans are rewarded with advice and seed capital, and act as the tentacles of big business, everybody stands to gain. It will give a whole new meaning to corporate social responsibility. Charity in the form of easy money does little good in the long term, but ideas that help build business will stand the test of time. To build successful partnerships between unequal partners will require time and attention from the corporate and banking sectors, not just money for the budding small businessman.

There used to be a motley collection of wartegs and kaki-lima eateries behind the gleaming towers of Kota BNI, in downtown Jakarta. To some, the sharp contrast would have been an embarrassment. Today, there's a shiny new row of stalls painted in BNI's blue and orange. I'm hoping the owners also have shiny new bank accounts. It may not be a giant step for Indonesia, but it is a tiny step in the right direction for small business. If every corporate entity, big and small, devoted a little time and attention to helping develop the country's small businesses, the country's backbone would get a whole lot stronger. To the advantage of all.

The writer can be contacted at debnath.guharoy@roymorgan.com
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