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Indonesia's Economy: Socio Political Challenges In The New Order

1821 words - 7 pages

Socio-political challenges post- New Order
Suharto’s New Order regime was blatantly corrupt and filled with nepotism, this mixed with the aftermath of the Asian Financial Crisis left a legacy of socio-political challenges for subsequent reformasi governments. These challenges include the legacy of authoritarianism, corruption, depoliticised civil society, a powerful military and an inefficient judiciary and government. (Pohlman) The different reformasi governments failed to comprehensively resolve these challenges, leaving Indonesia riddled in uncertainty, and thus leading to its economic sluggishness.
Government & Business
The post- New Order regimes have had to try and manage the aftermath of the Asian Financial Crisis (AFC), while simultaneously dealing with the repercussions of the Suharto regime. An area that this greatly impacted was the Indonesian business sector, which was struggling between the flight of the capital during the AFC, the IMF regulations and changes, and its corrupt business culture. Ultimately the new governments failed to properly address these issues creating an uncertain business and economic environment. The New Order regime left a lasting legacy of cronyism and nepotism, this opaque culture managed to survive the transition to democracy as it served both the political and business elite. The private sectors gains have often come at the expense of public welfare and the elite have used their political influence to block threatening reforms and to protect their interests. (Hamilton- Hart)
The Indonesian government has consistently failed to address certain concerns of international businesses and as a result has stifled the foreign investment that it needs in order to elicit strong economic growth. These concerns include excessive bureaucratic red tape, problematic taxation system, instability, corruption and the major problem of uncertainty regarding the ad-hoc implementation of laws and regulations. (Davidson) These factors served to detract foreign investment and made Indonesia one of harder places to conduct business. (Asia Monitor) Hamilton-Hart argues that progress can only be made once bureaucratic and governmental agencies are disciplined, accountable and there is a ‘pressing political imperative for rapid economic growth,’ conditions that are currently not present in Indonesia.
Government & Judiciary
Post- New Order governments failed to install ‘mechanisms of accountability’ in Indonesia’s business and judicial cultures and the unreliable enforcement of rules and regulations made Indonesia a risk for foreign investors. Indonesia’s Supreme Court is notoriously corrupt and through a series of high profile cases undermined the confidence of international and domestic investors. These cases involved bankruptcy, the seizure of assets and questionable rulings regarding asset distribution, showing the direction that the...

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