The Indonesian Tiger

While economists debate whether China or India will dominate the world economy of the 21st century, another rising Asian power is quietly entering the picture. Relatively unscathed by the global financial crisis, Indonesia's economy was projected to grow at a healthy 6.1 percent clip in 2010 and 6.3 percent next year, one of the fastest rates in Asia (and the world). What's more, its per capita GDP is projected to increase almost 20 percent in the next two years. Since 2009, Indonesia has had Asia's second-best-performing stock market. A number of analysts are now suggesting that the BRIC grouping might soon need to add another I.

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Part of the growth is driven by the country's abundant natural resources -- it is a major exporter of timber, coal, and silver -- but Indonesia's manufacturing sector is growing as well. Chinese clothing and furniture companies, which prospered by making goods for the American market, are now increasingly moving production to Indonesia, taking advantage of a free trade agreement between the two countries, which is just now coming into effect.

A peaceful and orderly presidential election last year reassured international markets of the country's political stability, and Indonesia's foreign direct investment increased 34 percent this year to $3.7 billion in the second quarter.

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December 2010: The Global Thinkers Issue

Some obstacles remain, of course. The country's banking sector is still fairly undeveloped (though ironically this helped Indonesia avoid the worst of the market crash). Poor infrastructure and official corruption also continue to hamper development in many parts of the country, though arguably this is the case in China and India as well. Indonesia also has one of the world's highest deforestation rates, though it pledged a two-year moratorium on logging in May.

The country still has a poverty rate of around 14 percent, which increased slightly this year due to the financial crisis, but Deutsche Bank projects that 52 million Indonesians will enter the middle class in the next five years, a development with potentially monumental consequences. And it's not just an economic story: Indonesia stands a good chance of becoming the world's first Muslim and democratic superpower.

JEWEL SAMAD/AFP/Getty Images

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