Southeast Asia's economies doing fine without using 'hot air' strategies
You can take it as certain that Mario Draghi's prescriptions for a "consistent common strategy" will not include Indonesian style increases in energy prices and interest rates.
You can take it as certain that Mario Draghi's prescriptions for a "consistent common strategy" will not include Indonesian style increases in energy prices and interest rates.
This microphone addict, the grand talk master of the European hot air show, has long proved himself bereft of any idea other than printing more money and urging governments to go deeper into debt.
You would think that by now he could see that the prescription is actually the poison to which it was meant to be the antidote but blindness to its results seems to be the first symptom of those who prescribe it.
Likewise, our report on the G20 talk shop in Brisbane last week noted that "world leaders" (mostly as in the blind leading the lame, I think) had pledged 800, yes 800, separate measures to stimulate economic growth.
Two examples were cited. One was encouraging more women around the world to enter the workforce, as if they have not already long been doing so and as if having these world leaders say so would make any difference to their decisions to do so.
The second was investment in infrastructure, which in this context invariably means going into greater fiscal deficit to fund construction of bridges, tunnels and roadways that no one needs in hopes that it will create jobs to make up for those lost by going into greater fiscal deficit. Oh, so clever, Mario.
As to the other 798 separate measures (quite separate, you understand, not the same at all), I have another safe bet - the resolutions all begin with "Enhance joint efforts to strive for greater coordination and inclusion of … blah, blah, blah".
And now Joko Widodo has shown them all up. Economic growth in Indonesia has averaged more than 6 per cent for the last ten years but he has a problem.
Although an oil and gas producer, Indonesia two years ago began importing more oil and gas than it exports and this deficit now runs at 1.5 per cent of gross domestic product. Fuel subsidies have additionally resulted in a persistent fiscal deficit. So Mr Widodo decided to go right to the root of the problem and raise fuel prices by 30 per cent. Almost immediately afterwards Indonesia's central bank raised its discount rate by 25 basis points to forestall any incipient inflationary result.
Will this hurt?
You bet it will. It cuts right to the bone in a country where the all pervasive motorcyclist buys his petrol by the soft-drink bottle. Fuel price riots were instrumental in overthrowing the regime of President Suharto 15 years ago. This stings.
But I am sure that Mr Widodo's prescriptions will have their intended result. The motorcyclist will grumble but pour the petrol into his tank rather than throw the bottle at the presidential palace. The current account and fiscal deficits will swing back into balance and inflation will remain restrained. Indonesia's economic fortunes will then stay firmly on the 6 per cent growth track and the motorcyclist will grow richer.
This is a country with as great a population as Germany, France, Britain and Italy combined. Given the difference between the likes of Joko Widodo and Mario Draghi its prospects are also better than any of these four.
It is what I would say of Southeast Asia in general. The emerging market troubles you hear of so often are the troubles of countries like Russia, Brazil and South Africa. Don't lump the likes of Indonesia, the Philippines, Malaysia and even Vietnam in with them. They are doing just fine.
In some countries people use hot air only to lift balloons.
