The List

5 Reasons to Believe in the Indonesian Miracle

Why this amazing archipelago is on track to be the world's seventh largest economy.

When most people think of Indonesia today, they think of beaches and temples or of its famously teeming cities, but this country of 240 million and counting is a much more modern, diversified, and dynamic economy than many international investors and companies assume. To make the most of Indonesia's vast potential, they're going to need to change the way they think about the archipelago -- and putting these five myths to bed is a good place to start.

"Indonesia's economy is unstable."

Hardly. Far from being unstable, Indonesia has been growing steadily at an impressive rate of 4 to 6 percent over the past 10 years -- less volatile than the economies of Brazil, Russia, India, and China, or any other developed country for that matter. Indonesian government debt has fallen by 70 percent in just a decade and is now at a level lower than in 85 percent of developed economies. Inflation, which was over 20 percent 10 years ago, now stands at 8 percent, comparable with more mature economies, such as South Africa and Turkey. Indonesia's overall economic management has also shown remarkable improvement. The World Economic Forum ranked Indonesia 25th out of 139 countries for macroeconomic stability in 2012, up sharply from 89th in 2007. For comparison, Brazil ranked 62nd and India ranked 99th.  

BAY ISMOYO/AFP/Getty Images

 "Not much happens outside Jakarta."

Not true anymore. Indonesia's sprawling capital city contributes up to one-quarter of the archipelago's entire gross domestic product (GDP). But Jakarta's dominance is waning. A large number of medium-sized or "middleweight" cities like Bandung and Medan are growing faster than the capital and will be ever more important hot spots for foreign investors and companies looking for opportunities. Urbanization is spreading in Indonesia and is an increasingly important growth stimulus. By 2030, more than 70 percent of the population is likely to live in an urban area, up from just over half today. Between 2010 and 2030, more than 30 million people are expected to move from rural to urban areas. Cities with populations between two and five million -- like Bekasi and Surabaya -- are growing the fastest and could together account for 27 percent of GDP by 2030. In fact, around 90 percent of Indonesia's fastest-growing cities will be outside the island of Java, where Jakarta is located, by 2030.

RIO ACHMAD/AFP/Getty Images

"Indonesia is nothing without its natural resources."

Not when you look closely. There is no doubt that Indonesia is unusually rich in natural resources. It is the world's largest producer and exporter of palm oil, the second-largest exporter of coal, and the second-largest producer of cocoa and tin. It has the fourth- and seventh-largest reserves of nickel and bauxite, respectively, according to the government. Indonesia also has the world's largest geothermal resources. And, yes, Indonesia has large endowments of crude oil and natural gas. But mining, oil, and gas only account for 11 percent of Indonesia's nominal GDP -- the same share as in Russia. In fact, Indonesia has been a net importer of oil since 2004. It may come as a major surprise to many observers that half of Indonesia's GDP comes from service sectors such as financial services -- specifically savings and investment -- retail, and telecommunications. Indonesia is already the fourth-largest user of Facebook in the world -- a promising platform for the development of e-commerce.

SONNY TUMBELAKA/AFP/GettyImages

"Indonesia is a typical Asian tiger."

Wrong. Indonesia's economy is not driven by exports -- a feature typical in most Asian tigers. Indonesia's exports only generate 35 percent of GDP, and, excluding commodity exports, only 16 percent. As the dominance of Indonesia's service sectors suggests, domestic consumption is the economy's driving force. And at a population growth rate of 5 to 6 percent a year, an additional 90 million Indonesians could join the "consuming class" by 2030. (Consumers are defined as individuals earning $10 a day or more, who therefore have enough money to spend on discretionary, not just basic, goods, and services.) That growth in consumer base is larger than any other economy in the world apart from India and China and stands as a testament to the growing market opportunity offered by Indonesia. Rising rates of consumption will bolster Indonesia's domestic market, bolstering growth in the long term. The fact that domestic consumption is already a large driver of Indonesia's growth has shielded the economy from the turbulence of the Asian financial crisis and the recent global recession. Catering to growing demand by developing its consumer services sector will ensure that the economy is even more insulated from future shocks. 

BAY ISMOYO/AFP/Getty Images

"Population growth is behind Indonesia's economic rise."

Yes and no. Indonesia does indeed have a young and expanding population that could total 280 million by 2030, up from 240 million today. And demographics are likely to support growth for some time to come, contributing 2.4 percent to overall economic growth until 2030. But it's not primarily people that are driving Indonesian growth -- it's productivity. In the last 20 years, increased labor productivity has been responsible for more than 60 percent of Indonesian growth, with the largest contributions coming from wholesale and retail trade, transport equipment and apparatus manufacturing, and transport and telecommunications. And contrary to the conventional wisdom that productivity improves at the expense of employment, both have risen in tandem in Indonesia for 35 of the last 51 years. 

To meet the government's ambitious target of 7 percent annual growth, Indonesia needs to do even better than it did in the past. Productivity growth needs to be 60 percent higher than it has been since 2000. That is challenging but achievable. If Indonesia boosts productivity and removes barriers to higher productivity and growth in three key sectors -- consumer services, agriculture, and resources -- and raises skills across the economy, it could accelerate growth and offer foreign investors a market opportunity worth $1.8 trillion opportunity by 2030. 

Indonesia is at a critical juncture. Its economy has performed more impressively over the past decade than many outsiders -- and even Indonesians themselves -- think. But to build on this performance, Indonesia will need a productivity revolution in key sectors of the economy. Today, the archipelago economy is the world's 16th largest, but with action now to unleash Indonesia's full dynamism, it could jump to seventh by 2030. That would eclipse Germany and the United Kingdom, two members of the G-7 group of the world's leading economies.

ROMEO GACAD/AFP/GettyImages

The List

Know Your Ansar al-Sharia

From Sanaa to Benghazi, Cairo to Casablanca, radical new jihadi groups have adopted the same name in recent months. Is it all just a coincidence?

There is a new trend sweeping the world of jihadism. Instead of adopting unique names, groups increasingly prefer to call themselves ansar, Arabic for "supporters." In many cases, they style themselves Ansar al-Sharia -- supporters of Islamic law -- emphasizing their desire to establish Islamic states. Yet despite the fact that these groups share a name and an ideology, they lack a unified command structure or even a bandleader like the central al Qaeda command (or what's left of it), thought to be based in Pakistan. They are fighting in different lands using different means, but all for the same end, an approach better suited for the vagaries born of the Arab uprisings.

The name Ansar al-Sharia shot into the news last week in the aftermath of the attack on the U.S. consulate in Benghazi, Libya, when the local organization Katibat Ansar al-Sharia was accused of perpetrating it -- charges the group denied. Many reports seem to have confused Benghazi's Ansar al-Sharia with another Libyan group, based in Derna.

The naming trend actually started in Yemen, when al Qaeda in the Arabian Peninsula (AQAP), the powerful and ambitious local al Qaeda branch, established the front group Ansar al-Sharia in Yemen in April 2011. It is possible this was born out of Osama bin Laden's musings over whether to rebrand al Qaeda. None of the names in the documents captured from the late al Qaeda leader's compound mentioned Ansar al-Sharia as a potential example, however. More recently, one of the preeminent global jihadi ideologues, Shaykh Abu al-Mundhir al-Shinqiti, put his stamp of approval on the new wave of Ansar al-Sharia groups.

Shinqiti, who is of Mauritanian origin, published an article in mid-June titled "We Are Ansar al-Sharia," calling Muslims to establish their own dawa (missionary) Ansar al-Sharia groups in their respective countries and then to unite into one conglomerate. It should be noted that most of the Ansar al-Sharia groups were already created beforehand. The most prominent of these organizations are the ones in Yemen, Tunisia, and Libya, along with newer versions in Egypt and Morocco to a lesser extent.

The rise of these Ansar al-Sharia groups points to an end of al Qaeda's unipolar global jihad of the past decade and a return to a multipolar jihadosphere, similar to the 1990s. One key difference, however is that jihadi groups are now more ideologically homogenous -- in the 1990s, jihadis thought locally and acted locally, while many now talk globally and act locally. These newer groups are also more interested in providing services and governance to their fellow Muslims.

Distinguishing between these differing groups is crucial for better understanding the new landscape of the Middle East and North Africa, as well as the trajectory of new salafi-jihadi groups that are not necessarily beholden to al Qaeda's strategies or tactics. Although there are no known formal or operational links between these disparate organizations, it is possible they may try to link up in the future based on ideological affinity and similar end goals. For now, though, conflating them would be premature. Here's a guide to the major groups going by this name.

Ansar al-Sharia in Yemen

While the other Ansar al-Sharia groups have no known operational links to al Qaeda, the Ansar al-Sharia group in Yemen (ASY) is part of a rebranding effort by AQAP. Shaykh Abu Zubayr Adil bin Abdullah al-Abab, AQAP's chief religious figure, in April 2011 first voiced this change by explaining that "the name Ansar al-Sharia is what we use to introduce ourselves in areas where we work to tell people about our work and goals." The group has since become a major local player in southern Yemen, having taken over parts of the southern Yemeni governorates of Abyan and Shabwa in the late spring of 2011 and only relinquishing its emirate in June 2012 after a counteroffensive by the Yemeni government and local militias, backed by U.S. airstrikes. While ASY was driven out of the cities, it is not dead and will likely come back.

One of ASY's greatest successes was its ability to provide services, filling a vacuum left by the central government's inability or unwillingness to do so. ASY boasted about providing electricity, water, security, justice, and education in its newsletter and video series "Eyes on the Events," which it released via its news wire service Madad News Agency. Although ASY's law and order was based on a very narrow and rigid interpretation of the sharia, its provision of governance was reasonably popular. So while ASY's extremist message may not always resonate in cities like Azzan or Zinjibar, desperate citizens might welcome the group nonetheless.

Ansar al-Sharia in Tunisia

In March 2011, after the ouster of President Zine El-Abdine Ben Ali, a variety of political prisoners and convicted terrorists were freed in a pardon by Tunisia's transitional government. One of the individuals was Sayf Allah bin Hussayn (better known as Abu Iyyadh al-Tunisi), formerly the co-founder of the Tunisian Combatant Group in Afghanistan, which helped facilitate the assassination of Ahmad Shah Messud two days prior to the Sept. 11 attacks. After being freed from prison, Abu Iyyadh organized the first of what is now an annual conference in April 2011 that founded Ansar al-Sharia in Tunisia (AST). The conference attendees grew from a few hundred in 2011 to upward of 10,000 in 2012, suggesting its popularity has grown, though still at the margins.

Since its founding, AST has had a schizophrenic ideology: calling people to the "correct" path of Islam in Tunisia and inciting individuals to join jihad in foreign lands. It appears that while AST has not claimed responsibility for the embassy attacks this past Friday, many of its members were at the very least participants in the protests. AST had been involved in some of the more aggressive Salafi actions in Tunisia over the past year and half, including the "Day of Rage" over a local channel's decision to air the film Persepolis; some AST members were also involved with the attack against the U.S. Embassy in Tunis and an American school nearby. AST has also provided services in many Tunisian cities, from water to clothes to Ramadan gifts.

Ansar al-Sharia in Libya

In Libya, a number of groups use a variation of the name Ansar al-Sharia. Two of the more prominent groups are Katibat Ansar al-Sharia in Benghazi (ASB), which is viewed as the prime suspect in the recent attack on the consulate and the more shadowy Ansar al-Sharia in Derna (ASD), led by former Guantánamo Bay inmate Abu Sufyan bin Qumu. Both groups were established after the death of former Libyan leader Muammar al-Qaddafi, but are not connected to one another. ASB first announced itself February 2012 and is led by Muhammad al-Zahawi, who had previously been an inmate of Qaddafi's infamous Abu Salim prison. ASB hosted the first of what it hopes to be an annual conference in June, whose roughly 1,000 attendees included a number other smaller militias, all calling on the Libyan state to implement sharia. A few hundred of those attendees are likely members of ASB.

Like the Tunisian Ansar al-Sharia, ASB has been providing local services. ASB members have cleaned and fixed roads, provided aid during Ramadan, and most recently were helping with security at a hospital in Benghazi. Although the group admits to destroying Sufi shrines and graves in Benghazi, ASB has attempted to carve out a niche locally as defenders of a strict interpretation of Islam, while helping with the basic needs of the community. Based on its statements -- which evolved from suggestions that members were involved in an individual capacity in the attack to flat-out denials of any involvement -- ASB seems it understands it overreached and is attempting to salvage its reputation.

Ansar al-Sharia in Egypt and Morocco

Unlike the groups in Yemen, Tunisia, and Libya, Egypt's Ansar al-Sharia (ASE) has not publicly announced itself as an organized group on the ground, while the Moroccan organization was only created a mere 10 days ago. ASE has only used the Ansar al-Sharia name online when providing releases for al-Bayyan Media Foundation, which is connected with the jihadi ideologue Shaykh Ahmad Ashush, who recently published a fatwa calling for the death of those involved in the making of the film Innocence of the Muslims. Ashush has a deep history in the jihadi movement, having been involved with the anti-Soviet jihad in the 1980s as well as being a member of the Egyptian Islamic Jihad (EIJ). He was arrested in the early 1990s in an anti-terror sweep against 150 members of EIJ and was only released from prison after the fall of Hosni Mubarak's regime. Based on known evidence, it would be premature to consider ASE a fully fledged group yet.

Ansar al-Sharia in the Maghrib (ASM) is a nascent organization that is only interested in dawa activities. ASM noted in its first and only statement thus far that it is not connected with the groups in Yemen, Tunisia, Libya, or Egypt. ASM's raison d'être is to spread the word of God and his law, provide social and economic services to the downtrodden, and expose the West's decadence and to free society from its grip.

Like the other radical groups across the region that share the Ansar al-Sharia name, it is very much worth watching carefully.

FETHI BELAID/AFP/GettyImages