The Gweilo reports on the state of affairs in Indonesia and mentions that things are not getting any better, on the contrary:

The most corrupt institutions in the country, the judiciary and the military are determined and have the power to stymie any reforms. The legislature is weak and similarly crooked. The largely Chinese business elite are the handmaidens of the corrupt indigenous military and political leaders, allowed special privileges as long as their illicit payments continue. Absent an effective middle class and with no one with the stature, integrity and ability to lead a reform movement visible, the rot and drift appear sure to continue for the foreseeable future.

It is interesting that he refers to the absence of a middle class. I clearly remember the fall of 1994 when I was part of group of international bankers and lawyers who were toasting to Indonesia’ s economic success in Surabaya’s Hyatt Hotel prior to the groundbreaking ceremony of the country’s first major independent power project. Our thinking was to a large extent built on the idea that the economic success in countries like Indonesia, Thailand, Malaysia and the Philippines would inevitably create a middle class that would be able to afford all the products offered by the deals that we were financing (power, water, telecoms, construction materials) and who in time would help these countries become healthy democracies with phenomenal economic power. Very often, when our flights were preparing to touch down we would circle metropolises like Jakarta and Bangkok and point to the new suburbs and say, “see, what a success story, these wealthy suburbs keep on growing”.

Many back in the US and Europe would point to the looming dangers and counsel against taking on more underwriting risks, using valid arguments against things like Suharto’ s rule in Indonesia, corruption and excessive US Dollar borrowing. Yet, at the time we on the ground as the experts on the region won the argument very often and the tide seemed to be in favour of investing in South-East Asia. And: no one wanted to run the risk of not participating in the lucrative business activity in South-East Asia so all the major European, American and Japanese banks piled into especially Indonesia and Thailand snapping up and financing deals that later turned out to be questionable indeed. I mean, how much power, how much cement does a country really need?

This often went as far as underwriting hundred million dollar deals by a single bank with the understanding that the funds would be recouped from a stock market offering later on. Banks would have a double whammy here, lending first and then leading a stock offering, fees and commissions galore. The problem was that by the time such deals were ready to be launched, the market for Indonesian deals had evaporated, the country’s currency had crashed and the place was in political disarray following Suharto’ s fall. To this day that situation has not improved and the wealthy middle class that would spend and vote the country up the ranks of the world’s developed nations has yet to materialize.