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Will Indonesia make it BRICI?

By largely escaping the global economic meltdown, Indonesia makes a run at the world's fastest-growing club.

Children play near new apartment blocks in Jakarta's business district June 1, 2009. (Beawiharta/Reuters)

JAKARTA — Indonesia, an emerging market, is becoming one of the world’s top performers.

Morgan Stanley recently suggested the country could be included among the likes of Brazil, Russia, India and China, which together make up the BRIC group of fast-growing economies in the developing world. And nobody really disagreed.

Whether BRIC will become BRICI anytime soon is yet to be seen. But the fact is that Indonesia has maneuvered through the economic crisis with a deftness unmatched elsewhere in the region — and the international community has noticed.

It has a relatively healthy economy, with a growth rate of just under 5 percent, far higher than anyone predicted considering the state of the world economy. That economic growth, coupled with Indonesia's remarkably stable democracy, bodes well for the world’s fourth most-populous country.

This week, Indonesia will hold its second-ever direct presidential elections. In all likelihood they will be peaceful, and President Susilo Bambang Yudhoyono, the market-friendly reformer, will be re-elected. This stands in stark contrast to the political upheaval elsewhere in Southeast Asia, particularly in Thailand and Malaysia.

It’s an impressive feat for a country that just 10 years ago was the major victim of a debilitating banking crisis and was embroiled in a revolution that saw four presidents in four years.

Now, Indonesia is the third-fastest growing economy in the region, behind India and China. In dollar terms, Jakarta's main stock index is up more than 72 percent since March, and up 67 percent year-to-date.

Yudhoyono’s reformist agenda is often credited with this jump in fortunes, and it is his current minister of finance, Sri Mulyani, who set the ball rolling.

“I think we will come out of this crisis with a better perception of our economic strength from abroad,” Mulyani said in an interview with GlobalPost. “Our role in the G20 put the country on the spot. And our role within ASEAN, as the biggest economy in Southeast Asia, which makes us the de facto leader, has elevated our international role.”

A lot has been said about the importance of foreign investment here. Mulyani quickly revamped the tax and customs offices to help attract more investment. Other major reforms are in the works.

But it is the strength of the country’s domestic markets that carried it through the worst of the crisis. When the world’s economies collapsed and international investors pulled out of Asia late last year, Indonesia did not go into a tailspin — unlike, say, Singapore, which is almost wholly dependent on foreign investment.

Foreign direct investment accounts for only about 25 percent of gross domestic product here. And so it's the country’s 240 million consumers who are driving the economy.

Bank Indonesia, which dramatically raised rates last year to fight inflation, has since continuously slashed them. Analysts believe there will be more cuts as inflation eases. Rates could be cut to less than 6 percent within months, bolstering even further the all-important domestic consumption.