Higher growth vs equity<\/p>\n
President Soeharto devoted the greatest portion of his
\nNational Day Address on Wednesday to recounting the economic
\nachievements over the last 30 years and charting out the economic
\ndevelopment agenda for the remaining four years of the current
\nSixth Five Year Plan, the first stage of the second 25-year
\ndevelopment program.<\/p>\n
His central theme differed from the main agenda of the various
\nseminars over the past few weeks. The seminars, held to coincide
\nwith the 50th anniversary of independence, called for a more
\nvigorous process of political reform to secure sustainable
\ndevelopment.<\/p>\n
We all agree that by any measure our economic achievements
\nhave been quite impressive over the last three decades. Even the
\ninternational community has praised our economic development as a
\nsuccessful model for other developing countries. These economic
\nachievements have been critical to political stability over the
\nlast 28 years.<\/p>\n
It is not the objective of this column to discuss how to
\nsequence political reform. However, the experiences of other
\ncountries show that as an economy is increasingly based on an
\nopen market mechanism, pressures for more political freedom grow
\nstronger. Economic progress creates social differentiation and
\nforces some degree of liberalization, which in turn creates
\npressures for political reform. Simply put, political reform is
\nvital for sustaining economic development.<\/p>\n
We fully agree that the economy should remain a top
\ndevelopment priority since roughly 26 million people still live
\nbelow the poverty line and a large number of others are on the
\nbrink of absolute poverty.<\/p>\n
We nonetheless have our reservations about the President's
\nsuggestion to revise the development targets upward over the next
\nfour years based on the country's higher-than-estimated growth
\nover the past five years. His suggestion is indeed well-meaning
\nand an attempt to prevent the people from becoming complacent
\nwith the impressive achievements of the past.<\/p>\n
Revising the targets upward, however, might result in policies
\nskewed for high growth at the expense of equity. Emphasis on
\ngrowth will focus attention on the high-growth segments of the
\neconomy -- the modern sector -- while the laggard sectors --
\nagriculture, small-scale and informal businesses and cooperatives
\n-- will remain mostly on the sidelines. Emphasis on growth may
\nalso result in a prolonged negligence of the least developed
\neastern provinces, areas with could disrupt national unity.<\/p>\n
A growth-centered strategy might especially be dangerous in
\nview of the already glaringly wide social and economic
\ndisparities between the rich and poor. Inequality is not only the
\nmost formidable challenge to economic development but a potential
\nthreat to the sustainability of the development process itself.<\/p>\n
After all, our development base is still rather weak due to
\nthe few large groups that dominate economic activities. Economic
\nstability could be put in danger if something were happen to
\nsome of the conglomerates.<\/p>\n
The gap between large businesses on one side and the medium
\nand small-scale firms on the other will likely widen if the
\nderegulation measures are not coupled with regulations to ensure
\nopen and fair market competition. Without competition laws, the
\ncartel-like, oligopolistic practices of the large conglomerates
\nwill continue unchecked.<\/p>\n
In fact, the number of creative and innovative entrepreneurs
\n-- some of our most valuable assets -- has declined steadily due
\nto a lack of clear-cut competition rules. The real entrepreneurs
\nwho tried to stick firmly to sound business practices and ethics
\nhave been bulldozed by rent-seekers and opportunists whose bigger
\nassets are political connections and access to the policymakers.
\nUniversity graduates with an entrepreneurial spirit are too
\ndiscouraged to enter the business world, preferring paid
\nemployment.<\/p>\n
The excesses of the government-mandated monopolies in various
\ncommodities and the privatization of several sectors previously
\nmonopolized by the state also contribute to greater social and
\neconomic inequities. The privatization process, often carried out
\nby closed negotiation and with no opportunity for competitive
\nbidding, is intrinsically suspect. Waiving competitive bidding,
\nfor whatever reason, allows for cost-padding and crony capitalism
\nand can result in private monopolies and new cartels.<\/p>\n
The current celebration of our 50th anniversary is an occasion
\nto contemplate more concerted and better-targeted efforts to
\nensure a more equitable distribution of income and economic
\nopportunities.<\/p>",
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"sponsor": "Okusi Associates",
"sponsor_url": "https:\/\/okusiassociates.com"
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