Market volatility, investor unease and fiscal strain are exposing deeper risks in Indonesia’s economy – where policy ambition is running ahead of institutional readiness.

Prabowo Subianto, the country next door’s egotistic leader is running a worthwhile but uncosted pre-election promise made to win votes without understanding how the pieces might fit and the scheme work. The message is for governments everywhere: get your ducks in a row – policy precedes delivery.

First, some background – and cheering news for readers who holiday in exotic places where beer is cheap and getting cheaper. That’s Bali.

For much of last year, the exchange rate was easy on the fingers – a true digital calculation – around 10,000 rupiah to the Down Under dollar. Now it’s more than 11,500.

Great for backpackers; even if your bar sneakily adds another buck to the next Bintang, but bad for the locals, particularly those who remember Krismon and fear its second coming.

It sounds like a horror movie monster, and that’s almost right. In 1998 the portmanteau word for krisis moneter (no translation needed) devoured the second president, Soeharto after 32 years of autocracy.

In the last week of January confidence in Indonesia’s corporate world slumped when the Composite Index fell eight per cent one day and ten per cent the next. The US 80 billion markdown was reportedly its worst performance since Krismon.

The New York based global index compiler MSCI (formerly Morgan Stanley Capital International) threatened to downgrade the ratings of Southeast Asia’s biggest economy over transparency issues, spooking investors and forcing two senior executives to quit.

Other troubling factors have been Prabowo’s abrupt sacking of his predecessor’s finance minister – the US-trained Dr Sri Mulyani Indrawati. After nine years in the job she was apparently given an hour to collect her handbag and leave the building.

Not the sort of gesture to calm investors. Reuters reported she “was widely regarded as one of the few checks on........

© Pearls and Irritations