The global south needs a leader. Why not Indonesia?

OVER the past decade, the world’s least obtrusive populist quietly built a case for indonesia as not just an attractive investment destination but a leader of the developing world. Now, President Joko Widodo’s onetime rival-turned-handpicked successor, Prabowo subianto, has a chance to fulfill those grand aspirations.

Prabowo, a former general accused of human-rights abuses, has indicated he intends to keep doing whatever his former boss was doing.

He has good reason: indonesia’s economic growth chugged along at 5% a year for the past decade, interrupted only by the pandemic. Most countries would envy such consistency.

indonesia today boasts a per capita income almost twice india’s. And Widodo proved to be even more of a fiscal conservative than india’s Prime Minister Narendra Modi: indonesia registers lower budget deficits, and a debt-to-gdp ratio about half of india’s. indonesia’s growth isn’t debt-fuelled.

A less expansive personality than Modi, indonesia’s Widodo did not explicitly choose to present himself as the voice of the “Global south”. His country’s G-20 presidency, in 2022, was not quite the multi-city extravaganza that india organised last year.

still, the very nature of indonesia’s economy – and Widodo’s plans for it – suggest he was a more representative “leader” for the developing world than Modi.

the cast of indonesia’s growth changed during Widodo’s administration. Coal exports once pumped up the numbers, particularly during periods of high commodity prices.

in the past couple of years, however, indonesia’s vast reserves of nickel – an important component in batteries – have made the difference. Nickel exports increased from Us$1.4bil a decade ago to almost Us$22bil in 2022.

Many countries across the developing world have squandered such reserves. Widodo instead used his control of nickel, as well as bauxite and copper, to strongarm investors into building processing and manufacturing operations in indonesia.

this singular principle – namely, that more of the profits from the mineral value chain should be captured by the country in which those minerals are mined – set indonesia apart from other large emerging economies, including india.

Jakarta’s geopolitical balancing act between the West and China is also more relatable for much of the world. tensions over its unquiet land border with China have pushed india into Us arms.

Meanwhile, Brazilian leader Luiz inacio “Lula” da silva has made quite clear that he wants his country to join China in challenging the existing world order. indonesia, devoted to its “free and active” foreign policy, has more room to manoeuvre.

Widodo was able to attract Chinese investment for new coal power plants, for instance, while also tapping the West for “just transition” money meant to retire coal.

China’s share of foreign investment into indonesia stood at 28.6% last year, compared to 5.1% when Widodo took office.

that may not continue. the Chinese economy may cool, reducing investors’ appetite for south-east Asia’s commodities.

On the other hand, Europe and the United states will have to look to indonesia to support their own green supply chains. swinging both ways, indonesia hopes to be the hinge in a decoupled world economy.

if Prabowo wishes to lay claim to emerging-world leadership, he will have to be more effective than Widodo in building coalitions of similarly placed developing countries.

the government has worried about indonesia’s remoteness from possible partners in such schemes, such as Mexico and Chile.

the question is whether Jakarta’s leadership can create a new understanding of how and where global investment should flow in coming years.

the West is throwing money at the industries that will propel the green transition. the developing world can only counter with a common approach toward retaining the value embedded in the minerals that are key to that transition.

the international Energy Agency projects that demand for clean-energy minerals will increase between 10 and 40 times by 2040. Prices will almost certainly skyrocket over that period – that’s just how resource economics works.

the profits from this surge can go to processing companies, mainly in China – or they can remain in the emerging economies that need the money to fund their development.

the only country capable of designing a global minerals policy that works for developing nations, and is acceptable to both the West and China, is indonesia.

if Prabowo can kick off that process, then indonesia’s central role in the economic story that will define the 21st century will be assured. — Bloomberg

Indonesia today boasts a per capita income almost twice India’s. And Widodo proved to be even more of a fiscal conservative than India’s Prime Minister Narendra Modi.