Cost of oranges betrays lack of zest in Indonesia's economy

Sun Sep 8, 2013 5:25pm EDT
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By Rieka Rahadiana and Jonathan Thatcher

JAKARTA (Reuters) - Indonesia's government is confident that a slide in economic growth, exacerbated by recent capital flight from emerging markets, is a hiccup that will soon pass. The price of oranges in a Jakarta market gives a clue why that faith looks misplaced.

Domestic demand should certainly get a healthy boost next year from spending during parliamentary and presidential elections. But that masks problems with the basic drivers of growth that some doubt will get more than cursory attention until a new government has to confront them in late 2014.

To appreciate the size of the problem - and why Indonesia's economy struggled, even in the last few years of stellar growth, to match its potential - consider the humble citrus fruit.

A farmer in Indonesian Borneo can grow a kilo of oranges for about the same price, or cheaper, than his counterpart in China. By the time they are bought by a shopper in the capital, though, the price of the Chinese oranges is up to 50 percent cheaper - even though they traveled nearly three times further.

An inefficient distribution system and failing infrastructure have long been on the list of fundamental issues holding back Southeast Asia's biggest economy from finally propelling itself to the next economic level.

The tide going out on the flood of money that had poured in from booming global commodity prices and investors hunting higher returns simply lays barer the lack of investment in economic building blocks like infrastructure and education.

One Jakarta-based foreign economist said the twin bonanzas of high commodity prices and cheap funding had "sucked the oxygen out of serious reform".

"It gave a false sense of security," said the economist, who asked not to be named because he was not authorised to speak to media on the issue.   Continued...

Workers sort out oranges at the Kramat Jati vegetable and fruit market in Jakarta September 6, 2013. REUTERS/Beawiharta