Friday, April 2, 2010

Indonesia outpacing us on reform, says Malaysian govt

In recent years, the development trajectories of Indonesia and Malaysia (which share a similar culture and could, at one time, have possibly become one country) have seemingly reversed.

Until the last few years, Malaysia was known for its political and social stability and, as a result, attracted significant international investment. Indonesia, on the other hand, was seen to be something of a basket case, riven by simmering racial and social tensions and handicapped by unstable government and dodgy financial institutions.

But President Susilo Bambang Yudhoyono has helped to resolve Indonesia's most divisive internal conflicts, eased racial divisions and begun the process of much-needed reform, helping the economy to record solid growth during the global crisis.

In the meantime, Malaysia has slipped into political and racial turmoil and its economy has stagnated, with large outflows of foreign money, some of which has probably gone into Indonesia, seen increasingly as the one of the world's most attractive emerging markets.

Even the Malaysian government now seems to accept that it is falling behind its neighbour. In the 206-page full version of the New Economic Model, unveiled by PM Najib Razak on Tuesday, the Malaysian government concedes that Indonesia is moving ahead in efforts to combat corruption and cut red tape.

"Countries in the region are combating corruption more effectively while implementing comprehensive reforms to reduce the cost of doing business," the report says. "In this context, Indonesia will soon outpace us as their reform actions inject renewed vigour into their economy as evidenced by stronger growth rates."

A rare admission of weakness by the Malaysian establishment, which likes to think of itself as being far superior to its poorer Indonesian cousins.


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