With the first round of election results in from Indonesia's presidential elections, Susilo Bambang Yudhoyono (SBY), goes into the run off as favourite to win against the incumbent President Megawati. Foreign investors are clearly hoping for an SBY victory due to his positive comments about the need for attracting new FDI. In this regard, it is perhaps instructive to look at another Southeast Asian president with whom SBY shares uncanny similarities.
Fidel Ramos was president of the Philippines from 1992 to 1997 and in that time he brought peace, stability and much needed foreign investment to the country. His election must be looked at in the context of what came before, namely the period of national healing that Cory Aquino brought to the country after the end of Marcos' dictatorship.
For Aquino, look at Megawati Sukarnoputri. Both women were politicians whose rise to power came at a time when both countries needed calm, cohesion and a certain amount of mothering. Once calm prevailed in the Philippines it was time for a new approach.
Ramos brought a sense of responsibility and growth to the country. In his five years in power he transformed the Philippines into one of the hottest destinations for foreign investment in the region. Transparency, openness and a willingness to do business were hallmarks of his administration. Foreign investors loved him.
Like SBY, Ramos was a military man, who had served under a discredited administration, but was not tainted by it. He was close to the US, being a graduate in the 1950s of the US military academy at Westpoint and the University of Illinois. He even fought alongside US troops in Korea and Vietnam.
SBY is similarly close to the US, having trained at US training colleges at Fort Benning and Fort Leavenworth. He has said that after Indonesia, the US is the country he calls home and he is fluent in English.
Like Ramos, SBY has an open and welcoming attitude towards foreign investment. And the Indonesian economy badly needs new investment. FDI levels are falling fast. Domestic consumption has held up the economy but it can only do so much.
Without new investment, the economy will surely falter. If SBY wins, he should look at some of the policies Ramos undertook to solve problems the Philippines faced at that time, similar problems that Indonesia is facing now.
One obvious problem is the power sector. Like the Philippines in the early 1990s, Indonesia is now suffering from rolling brownouts and blackouts, as a creaking and bankrupt state run power sector finds itself unable to cope with the demands placed upon it.
Ramos realized he needed two things: more power and more finance. And he could only get these if investors, both debt and equity, had faith in the investment climate. He signed a series of rock solid IPP contracts to get more power generated and ensured that the National Power Corporation (Napocor) had access to international finance so power could be transmitted and distributed.
Despite the troubles facing Napocor now, this solution was the right thing to do at the time. The new Indonesian administration must see that just as Ramos did with his power sector, restoring the credibility of PLN, the state power company is the only way for the country's power problems to be resolved.
By bringing more electricity to the country, the new Indonesian administration will show it is serious about foreign investment. In order for this to happen, the country will have to resolve past issues, offer new, transparent contracts and abide by the rule of law. If these can be achieved in the power sector, foreign investors in other sectors will return to Southeast Asia's biggest country.
SBY could well bring about the renaissance in FDI that Indonesia so badly needs. As Ramos showed, it requires bold, transparent steps that rise above the petty squabbles of domestic politics. If he succeeds, Indonesia could well enjoy a period of growth every bit as successful as that of the Philippines in the mid 1990s.
