Environmental concern still lacking<\/p>\n
By Juwono Sudarsono<\/p>\n
JAKARTA (JP): Even before the monetary and economic crises
\nengulfed East Asia almost a year ago, Indonesia's problems in the
\npolitical, economic and social spheres were formidable.<\/p>\n
Despite success over the past 30 years in maintaining an
\naverage annual growth rate of 7 percent, reducing absolute
\npoverty from 56 percent to 12 percent of the population,
\nmaintaining fundamentally sound macroeconomic policies (adequate
\nreserves, low inflation, balanced budget, manageable current
\naccount deficits), transforming GDP per capita from US$70 to
\n$1,300 the essentially unpredictable forces of global financial
\nand capital markets (\"casino capitalism\") served to underscore
\nthe imperative to establish strong social, political and economic
\ninstitutions that have been made even more compelling in light of
\nIndonesia's efforts to recover from its present difficulties.<\/p>\n
The crises came about as a result of three fortuitous external
\ncircumstances which began between May and July 1997.<\/p>\n
1. Strengthening to 50 percent of the United States dollar
\nagainst the Japanese yen since the bubble of the Japanese economy
\nburst in 1991. As a result, Japan began to regain its
\ncompetitiveness vis a vis other Asian economies; Malaysia's
\nexport fell to 4 percent from 26 percent in 1995, Indonesia's
\nwere down to 8.8 percent from 13 percent, and Thailand to 0.1
\npercent from 25 percent. ASEAN exports became uncompetitive, both
\non an exchange rate basis and on wage productivity differentials.<\/p>\n
2. Devaluation of the Chinese currency by 35 percent in
\nSeptember 1994, resulting in its manufactured exports becoming
\nmuch more competitive in Japan, Europe and North America. This
\nadversely affected ASEAN, especially Indonesian manufacturers
\nwhich had enjoyed advantages in securing markets throughout the
\n1980s and early 1990s.<\/p>\n
3. Massive corporate loans (totaling roughly $56 billion from
\nEurope and Japan, $16 billion from North America) to largely
\nnonperforming private banks and companies in Indonesia, without
\nadequate and effective controls over amounts, terms and target
\nallocations. It was a clear case of \"too easy, too much, to
\nsoon\". Foreign private lenders as well as domestic private
\nborrowers were both at fault.<\/p>\n
The comparative advantages Indonesia enjoyed from three waves
\nof manufacturing relocation from Japan and the East Asian tigers
\nin the 1970s and 1980s was eroded by the rise of competitiveness
\nfrom China, Vietnam and India.<\/p>\n
In industries involving the use of large-scale labor, the
\nprice and wage competition became immediately regional as well as
\nglobal. The margins of functional productivity and value-added
\nefficiency become more important than cost-cutting geographical
\nadvantage.<\/p>\n
The instantaneous and unpredictable nature of globalized
\ncapital and money markets underlined the need to establish rule-
\nbased institutions that provide consistency and transparency in
\nlaw, administration and policy-making.<\/p>\n
Five issues characterize the impact of globalization in
\nIndonesia:<\/p>\n
1. Income inequality. Without an adequate capacity on the part
\nof economic institutions to cope with accelerated change in an
\nincreasingly integrated financial and capital markets, unskilled
\nworkers suffer from the application of new management techniques
\nand innovate technology. Overall, unskilled workers are
\nmarginalized by globalization. Despite Indonesia's efforts at
\nmaintaining a steady balance among equity, growth and political
\nstability, the pressures of distorted development -- particularly
\nin the midst of the present crises -- were only too apparent.<\/p>\n
2. Decreasing jobs and wages. Foreign corporations and local
\npartners often effectively decide terms and conditions for
\nworkers. They can also apply the threat of relocation of
\nproduction to other sites or countries to bargain down wages and
\nbenefits. The destruction of governmental and corporate wealth in
\nIndonesia led to the dismissal of roughly 13 million low-paying
\njobs within the past six months. The \"magic of the market\" works
\nfor those who have ready access to capital, information and
\nskills.<\/p>\n
3. Environmental damage. Economic growth has largely relied on
\nconventional notions of development, resulting in the tearing
\ndown of forests, overfishing, depletion of minerals and poisoning
\nof land by agrichemicals and soil erosion. The recent forest
\nfires in Kalimantan destroyed roughly 480,000 hectares of
\ntropical forest, with estimates of losses at US$970 million. Of
\nprimary importance in the nation's action agenda is a greater
\nneed for a complete transformation in the outlook and behavior in
\nthe way that all Indonesians, whatever their social station,
\ntreat the environment.<\/p>\n
4. Loss of social capital. Many rural and urban communities
\nare bypassed or undermined by the effects of globalization.
\nSocial units and networks that for decades provided a resilient
\nsense of community, social peace and informal education have
\nsuffered from increased fragmentation as individuals, groups and
\ncommunities jostle for immediate economic and material gain,
\nspurred by calls for \"risk-taking entrepreneurship\". Greed
\nreplaces solidarity, particularly in vulnerable urban
\nconcentrations. Interethnic and intercommunal relations are put
\nunder great strain as demagogues resort to populist rhetoric
\ntinged with scapegoatism against minorities.<\/p>\n
5. Decline in political sovereignty. The increased role of
\nforeign and domestic private firms in determining the national
\npolicies of governments serve to stimulate the pervasive power of
\npowerful interests groups in maintaining legitimacy through the
\npower of money. National parliaments and the executive branch of
\ngovernance face powerful monetary and material temptations, that
\nserve to influence policies. The recent government's agreements
\nwith the IMF serve to underline the vulnerability of the
\nIndonesian state to external pressure through opening the
\nIndonesia economy to foreign capital investment and service on
\nbehalf of deregulation.<\/p>\n
That is why there are increased concerns that despite the
\nopportunities offered by globalization -- greater freedom and
\nmore prosperity for skilled professionals -- those very forces
\ncan also result in economic disadvantage, social disruption and
\nmassive culture shock for the majority of our poorer citizens.<\/p>\n
Striking laborers in the manufacturing industries, endless
\ndisputes over land titles with the inflow of capital for
\ninfrastructure project and large-scale underemployment among
\nyouth will remain formidable challenges in the years ahead.<\/p>\n
Leaders from all walks of life -- politics, economics and
\nbusiness, arts, culture and religion, the media, the
\nuniversities, science-technology, the military -- who equate
\nstability with the status quo will doom themselves to sterility.<\/p>\n
But for effective change to take place, there must be measured
\nsteps toward enhancing stability in stages, rising to a higher
\nplane and reaching out toward a broader base of economic, social
\nand cultural empowerment. There are no easy solutions.<\/p>\n
The evolving changes in the regional and global situation
\ndemand that Indonesian leaders constantly calibrate the forces of
\npolitical, economic and cultural changes that ultimately are
\ncrucial in determining the nation's comparative and competitive
\nadvantages.<\/p>\n
The intertwining of domestic and international interaction
\nmust be continuously appraised. The task of present and
\nsucceeding generation in Indonesia will be to remain equal to the
\nrising forces of globalization hurtling across Asia and the
\nPacific as well as throughout the world.<\/p>\n
The writer is a former state minister of environment. He is
\nminister of education and culture in the Development Reform
\nCabinet set up yesterday.<\/p>\n
Window: The comparative advantages Indonesia enjoyed from three
\nwaves of manufacturing relocation from Japan and the East Asian
\ntigers in the 1970s and 1980s was eroded by the rise of
\ncompetitiveness from China, Vietnam and India.<\/p>",
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