Boom in the Gloom.(Indonesia)(Brief Article)

Most foreigners look at Indonesia and see the failing state evoked in international headlines: a place choking on smoke from forest fires, drowning in debt and struggling to quell ethnic rebellions and to recover from the Asian financial crisis. But there's another Indonesia, which Eric Rosenkranz sees from the Hong Kong office of Grey Global Group, the advertising multinational. For him, few markets hold more promise than the archipelago of 216 million people. In the last two years, Grey has seen revenue from its Indonesia office grow at double-digit rates, and it expects an additional 50 percent increase this year. Rosenkranz, the firm's Asia-Pacific president, sums up business in Indonesia as "phenomenal."

Indonesia has become something of an oddity in an era of globalization: a pariah economy, doing quite well in semi-isolation. Since the Asian crisis of '97, foreign investors have been wary of Asia--but have shunned Indonesia, where the crisis hit its nadir in economic depression and political revolution. The Jakarta stock market is a tiny fraction of its '97 high, and the Indonesian rupiah has stabilized at about 10,000 to the dollar, or roughly a quarter of its former value. Yet, against this backdrop of gloom, Indonesia grew at a healthy 3.3 percent clip last year, buoyed by resurgent consumers. "We have nowhere else to go but up," says Jakarta economist Taufiq Alimi.

This growth in defiance of global trends mirrors the story of China, another resilient giant buoyed by a large domestic market. The difference: China is slowly opening itself to international markets that have turned against Indonesia, which makes Indonesia more of a surprise. The Indonesians have thrived in part because the weak rupiah tends to promote exports from Indonesia and discourage imports, providing a double boost to the domestic economy.

The result is a boom largely unnoticed abroad. Domestic consumption is growing at a 7 percent annual clip, driven by small purchases. The 50 million middle- and upper-class Indonesians buy a lot of instant noodles, soap and cigarettes from local companies, which are pouring money into promotion. The ad market is expected to grow 9.5 percent this year. Grey is hiring new staff to ...