Unleashing

Joko Widodo was sworn in this week as the new President of Indonesia, the world's fourth most-populous country, third-largest (and newest) democracy, and largest Muslim-majority democracy.

Jokowi (as he is universally known) engineered a remarkable rise to power. As a furniture dealer, then mayor of his hometown, then governor of Jakarta, he established, early-on in this national election process, a strategy of showing up at ordinary households in ordinary communities - a classic grassroots campaign - thus sparking hope and even excitement in this island-nation of some 250 million. The approach was in marked contrast to the normal process wherein a comfortable, old-guard Jakarta elite effectively fixed, sometimes ruthlessly, the outcome; election officials remarked on the passion with which people arrived at voting stations. So accustomed to government incompetency and corruption, Indonesians broadly rejected Mr. Widodo's rival, Prabowo Subianto, a former general under, and son-in-law of, the late dictator Suharto (and perennial candidate for President), to usher in a regime that, they believe, may just have some inclination - and chance - to help them.

The path to Mr. Widodo's victory was hardly smooth. An election race marked by controversy, and voting in July, were followed by weeks of at-times violent protest. Mr. Subianto refused to concede defeat. It wasn't until just this week that a nine-member court, acknowledging some voting irregularities, issued a ruling that a re-voting would not overturn the results.

So President Widodo has just now begun governing, with a new Cabinet to be announced tomorrow. In an economic environment where commodity prices have weakened and growth in the country's trading partners has either slowed substantially, as in China, or remains stagnant, as in Japan, Indonesia's economy is still expanding, but much more slowly, growing at 5.2% in the first half of this year, the slowest since 2009. Inflation, accelerating dangerously in 2013, has eased back to the 5-6% range in recent months as monetary policy has been tightened. Such tightening also appears to have halted the slide in the rupiah, which nonetheless remains near its lowest level against the US dollar in five years. A larger trade surplus emerged in the first half of this year, as imports dropped more steeply than exports, but after accounting for income and trade in services the current account balance is in deficit by a little over 3% of GDP.

Unlike many other emerging countries with large current account deficits, Indonesia has continued to comfortably finance its external deficit, attracting large inflows of foreign direct and portfolio investment (to an extent that its holdings of international reserves have risen over the past year, and are now close to an all-time high). Many of the world's leading multinational corporations are present in Jakarta, focused on development of the country's vast coal, oil, copper and other raw materials. For example, Unilever Indonesia, the local arm of Anglo-Dutch consumer goods giant Unilever, is investing some $170 million in a palm-oil processing plant in North Sumatra, and, significantly, is undertaking the investment as one part of its overall ambitious corporate strategy of sustainably sourcing 100 percent of its agricultural raw materials by 2020, including palm oil, soy, sugar, tea, fruit and vegetables, sunflower oil, rapeseed oil, dairy and cocoa.

President Widodo's challenges are nonetheless many. Political parties sympathetic to Mr. Subianto control the legislature. And regarding economic policy, he will need to further reduce domestic fuel subsidies (that consume a fifth of the budget) in 2015, re-directing revenues to education and health. Perhaps most importantly, he must begin the long but urgent process of fixing the country's awful infrastructure (particularly its ports). In this latter regard, he would be wise, with his fresh political mandate, to harness the financial resources and expertise of Jakarta's multinationals - if ever there were fertile ground for private/public partnerships to unleash a country's economic potential, it is now, in post-election Indonesia.

Imposing Sanctions

They work partially, some of the time.

This is the history of economic sanctions, a foreign policy tool that has been applied to various regimes over the past decades, most notably for 52 years against Cuba, with no impact at all if defeating the Castros was the objective, against South Africa to force an end to apartheid, and more recently against Iran, arguably with some success at least in pushing that country into negotiations regarding its nuclear program

America, and its (at times) reluctant European allies, are now using sanctions to counter Russia's adventurism in Eastern Ukraine. With a military response clearly off the table, the West  responded to Russia's annexation of the Crimea in March first with so-called "smart" financial sanctions aimed directly at Vladimir Putin's close associates, and re-enforced these with an embargo of exports of certain high-tech equipment. The intent, to stop further Russian incursion, clearly failed, as Mr. Putin continued with a barely-disguised military strategy to disrupt then control Donetsk and other Russian-speaking cities in Eastern Ukraine; he also imposed sanctions of his own, stopping food imports, and in August even closing some branches of McDonald's, citing health concerns. The downing of a Malaysian airliner in July by pro-Russian forces toughened the European stance, as more Russian individuals were targeted and new measures restricted Russian state-owned banks from access to long-term financing in London, Frankfurt and other European capital markets. A much bolder plan was then floated by the UK, whereby Russian banks would be blocked from using the SWIFT network, a Brussels-based system of international bank-to-bank payments that would seriously disrupt Russia's internationally active companies (in 2012 America convinced SWIFT to halt Iranian banks' access, a move widely credited with a sudden change of direction in Tehran's nuclear policy). While this measure is being considered, the Obama administration has more recently moved to ban American companies from providing advice and services to Russia's Rosneft, the state-owned oil company. Oil output makes up about one-fifth of Russia's gross domestic product, and taxes on oil and gas production contribute more than half of government revenue. Technical expertise is sorely lacking in Russia. Hitting this sector thus has the potential to choke the Russian economy, already showing clear signs of accelerating inflation and anemic growth.

Sanctions, then - especially if they continue to be ratcheted up - cannot be ignored by Mr. Putin, if only because they are pushing a fragile economy into outright recession. The Russian rouble is at an all-time low against the US dollar. Russia's former finance minister, Alexei Kudrin, has estimated a 5% contraction in GDP if more sanctions are brought to bear. As well, the strain is evident within the Russian elite, with renewed infighting. Political and economic conditions aren't desperate yet, but it's not a huge stretch to suggest they could become so.

Hong Kong Updated

In July, this writer released a note on China's increasingly forceful strategy of achieving complete political dominance over Hong Kong (Eroding Freedom). Given the highly-developed economic and social status of the city's 7.2 million residents (quick primer: Hong Kong's Human Development Index is 90.6; China's is 69.9), I suggested that Beijing would, however, face equally forceful opposition, as Hong Kong citizens would continue to push back vigorously through mass street protests supported by their still-unregulated social media activity.

But, in recent weeks, such push-back appears to have become less vigorous, even dispirited. On Sunday, only a few thousand protesters, compared with hundreds of thousands earlier this summer, showed up (albeit in pouring rain) in the city's financial district to listen to an address from Benny Tai, a founder of the Occupy Central pro-democracy movement. That same day, China had announced its formal rejection of completely free elections for Hong Kong's chief executive in 2017. Instead, the election process offered by China will maintain a secretive system wherein candidates are nominated by a 1,200-person committee, members of which are chosen by Beijing from the city's business community - a key sector which is regarded as being more interested in not offending China (quick primer: China is by far Hong Kong's biggest trading partner) than it is in democratic principles. According to the text of China's Sunday announcement, "the chief executive shall be a person who loves the country and loves Hong Kong". This is evidently code for someone who will not tolerate any challenge to the authority of the Chinese Communist Party. And just to reinforce the point, China's state-run People's Daily newspaper over the week-end described Hong Kong's chief executive as "a regional head in the People's Republic of China", suggesting that Beijing is moving away to an increasing degree from the "one country, two systems" concept enshrined in The Basic Law of 1997.

However aggressively Beijing is behaving towards Hong Kong, it is surely aware it must be careful in not pushing too hard. A majority of Hong Kongers, who may be mostly complacent - or pragmatic - today, might still object as 2017 nears. And there are broader Chinese concerns. Taiwan, the self-governing island of 23 million people claimed by China for decades, is watching the Hong Kong process closely; could, for example, Taiwan feasibly expect to enjoy meaningful economic and political freedom if it joined the Chinese mainland voluntarily? And when will citizens of large - and booming - Chinese cities, such as the 7 million in nearby Shenzhen, begin to demand that political freedom become part of its social fabric? Beijing Communists, at least sensible ones, are no doubt familiar with a lesson from history - that democracy can be contagious, and with a (sometimes long) lag, often accompanies economic growth.

Long-Term Effects

The story runs that this Spring, a team of aid workers, some from foreign charities, arrived in the Kailahun region of eastern Sierra Leone with one mission only - to bury bodies of villagers who had just died after being infected with the Ebola virus. The idea was to prevent further infection that was likely if the bodies were handled by local men not wearing protective clothing. Not unusually, the appearance of the aid workers caused panic and chaos. Women and children fled, fearing that the central government in the capital, Freetown, had dispatched the burial team to, instead, deliberately spread the virus; village men, believing in any number of other conspiracy theories, denied that dead bodies existed, and forced the team to leave. They would deal with the disease far more effectively, they were convinced, through the use of traditional healers.

Such is the mistrust of the Sierra Leone government, and of Westerners, particularly within the remote eastern portion of the country that has long been neglected and even repressed by the central authorities. Indeed, in most rural areas of the country, availability of even the most basic government services, and especially access to health-care, is virtually non-existent. Under such conditions, containing the spread of Ebola, which this year has already killed more than 700 people in Sierra Leone and above 1,000 in West Africa as a whole, is much harder. The widespread suspicion of government intentions is the legacy of several decades of corruption, and just bad management of the country's considerable natural resource base (which includes diamonds, titanium, gold and rutile). Political chaos ensued almost immediately after the country became independent from Britain in 1961, eventually leading to a brutal 11-year civil war which, when it finally ended in 2002, left the country devastated, with some 50,000 people dead and over 2 million people displaced into neighboring countries.

More than a decade has passed since the end of this civil war, but its effects are still glaring. Little of the country's infrastructure is re-built; add poverty, fear and hatred of government workers to this mix, and it is hardly surprising that another public-health crisis, in the form of Ebola, and now of international concern, has once again emerged in the region (which includes Liberia to the east and Guinea to the north). In the absence of political and economic development, sustained over the next many years, Ebola outbreaks may well become a chronic condition.

Eroding Freedom

On June 30, some 800,000 Hong Kongers participated in a mock referendum, the outcome of which indicated their desire for more freedom in electing the city's chief executive. China denounced the poll as illegal. The next day, upwards of 500,000 city residents, including many students, took to the streets to protest, vigorously but mostly peacefully, what is perceived as continuing pressure from Beijing to reduce the former British territory's social and political freedoms. Then, on July 15, Chief Executive Leung Chun-ying sent off a report to his Chinese masters outlining his suggestions for reforming the city's electoral process; in it he wrote that most citizens had no desire for greater political autonomy, being quite satisfied with the status quo.

Such is the gap between Mr Chun-ying, with his clear priority of meeting the demands of his bosses, and the people of Hong Kong. Protestors' latest frustrations, amply demonstrated as they marched through the streets, were sparked this time by a Chinese "white paper" issued in June asserting that the political autonomy given Hong Kong in 1997 (when Britain handed over power of the territory to China) is a gift of Beijing, that is, at the discretion of Chinese leaders; moreover, a basic requirement of the city's judiciary is "loving the country", with a duty to "be patriotic" - clearly inconsistent with Hong Kong's common-law English system that regards judicial independence as fundamental. All this seems to suggest that China is rapidly moving ever further away from The Basic Law - under which Hong Kong has been governed since 1997 -  which provides a formula of "one country, two systems". The Law describes universal suffrage in the election of the city's leader and legislative council by 2017 as its "ultimate aim", compared with the current system wherein candidates for chief executive are chosen by a pro-Beijing committee of 1,200 members who then also elect the leader.

Perhaps the clearest evidence that China intends to win its fight with the pro-democracy forces within Hong Kong is the emergence of an increasingly docile local press which, while still freer than its mainland counterparts, seems ever more willing to pull its punches. For example, the June Chinese white paper, which in an earlier era would have been slammed by virtually all mainstream newspapers in the territory as political sham, was instead (with one or two exceptions) treated in remarkably neutral fashion. No doubt this reflects recent Beijing-inspired management shake-ups at several news organizations, to say nothing of outright violent incidents of intimidation - the editor of Ming Pao, Kevin Lau, for example, was fired in January, then a month later nearly killed in a knife attack by a triad gang.

But if the press is backing away, the people are not. Social media, still uncensored in Hong Kong, are humming. Mass, grass-roots demonstrations can be expected to become the norm as the 2017 deadline for universal suffrage in Hong Kong draws nearer. That such a highly-developed society will simply give in to a far-off central authority, intent on suppressing local freedoms, stretches the imagination. Beijing's game plan is likely to include more bullying, setting the stage for what could be one of this century's epic battles for self-expression, and more broadly, political and economic self-determination. How, and if, Britain, and America, decide to involve themselves, will be equally epic.