Indonesia really in transition?<\/p>\n
This is the first of two articles by Chris Manning,
\nwho heads the Indonesia Project at The Australian National
\nUniversity in Melbourne. He is also co-editor, with Peter van
\nDiermen, of Indonesia in Transition: Social Aspects of Reformasi
\nand Crisis.<\/p>\n
MELBOURNE (JP): On June 13, the Centre for Strategic and
\nInternational Studies in Jakarta hosted an Indonesia \"Update\"
\nconference in cooperation with the Indonesia Project of the
\nAustralian National University, to coincide with the launch of a
\nbook titled Indonesia in Transition: Social Dimensions of
\nReformasi and Crisis (ISEAS and ANU, 2000).<\/p>\n
Minister of Maritime Exploration Sarwono Kusumaatmadja
\nlaunched the book and spoke about the special need for attention
\nto climate change, and the ongoing costs of policies which
\ndevastated the environment during the Soeharto era.<\/p>\n
Much of the discussion at the one day talks inevitably focused
\non the capacity of the President Abdurrahman Wahid's
\nadministration to deal with immediate challenges in the wake of
\ninternal troubles faced in the last few months.<\/p>\n
These included the continuing failure to resolve the Bank Bali
\nscandal and the standoff between the President and Bank Indonesia
\ngovernor Sjahril Sabirin, the State Logistics Agency (Bulog)
\naffair, the seeming inexplicable dismissal of former minister
\nLaksamana Sukardi and constant rumors of yet another Cabinet
\nreshuffle.<\/p>\n
However, in line with the spirit of minister Sarwono's
\naddress, more long-term concerns were not far from the surface.
\nEconomist Djisman Simandjuntak perhaps best characterized the
\ncurrent process of policy-making in Jakarta as \"muddling
\nthrough\".<\/p>\n
Indeed he questioned whether Indonesia was really in a
\ntransition, since the word implies both a beginning and an end-
\npoint to an ongoing process.<\/p>\n
Both at the Update conference held in Canberra in September
\n1999 and again in Jakarta, \"muddling\", by putting market oriented
\neconomic reforms squarely on the back burner, has been seen by
\nmany as an inevitable, even desirable.<\/p>\n
It is argued that the new regime still has to tackle big
\npolitical and social reform issues that have been put on hold for
\nfar too long.<\/p>\n
What will Indonesia look like in 10 to 15 years time if indeed
\nthe government continues to show mixed signals to potential
\ninvestors, and if inter-elite politics continues to dominate the
\nattention of the President and ministers (who might otherwise be
\nseriously engaged in confronting the issues of debt workouts,
\nbank restructuring and enticing a return of foreign and Chinese
\nbusiness)?<\/p>\n
One clear implication is that Indonesia will almost certainly
\njoin the Philippines, not only as the poorer, but also the
\nlagging cousin in Southeast Asia, and indeed all of East Asia.<\/p>\n
Even with strong oil and mineral prices, and a booming
\nagricultural sector, economic growth is unlikely to top 5 percent
\nin the near future, and may well only average about 2 percent to
\n3 percent at best.<\/p>\n
This means virtually no growth in per capita terms. The
\neconomic growth figure achieved under Corazon Aquino was 2
\npercent to 3 percent, even during the later Ramos reform years in
\nthe Philippines in the late 1980s and 1990s.<\/p>\n
As my colleague Hal Hill pointed out, this has left per capita
\nincome no higher than in the early 1980s and a debt service ratio
\nof 40 percent of the public budget in that country.<\/p>\n
In contrast, the Indonesian economy expanded at close to
\ntriple this rate from 1970 to 1996, and at the same speed, or
\nindeed a little faster, than Malaysia and Thailand (albeit from a
\nmuch lower base). Growth under Soeharto was not pretty,
\nespecially in the later stages.<\/p>\n
But it reduced Indonesia's public debt and raised living
\nstandards of most people several fold. In contrast, at the much
\nslower Filipino growth rate Indonesia would begin to fall even
\nfurther behind its more prosperous neighbors, both of which are
\nwell on the path to recovery from the crisis.<\/p>\n
Many social scientists will not be particularly perturbed by
\nsuch a prospect. Indeed they have long argued that economic
\ngrowth is over-rated as the key indicator of economic and,
\nimplicitly, social progress -- especially with the memory still
\nfresh of extreme wealth and power amassed at the hands of the
\nSoeharto family during the rapid growth period in the past.<\/p>\n
Commentator Aristides Katoppo argued at the Jakarta meeting
\nthat slavish devotion to economic growth has been one factor
\ncontributing to now unacceptable costs of environmental
\ndegradation and social dislocation.<\/p>\n
What then are the likely costs to ordinary Indonesians of the
\neconomy \"muddling\" through, compared with what they have been
\naccustomed to in the past several decades? Three key points stand
\nout, in part informed by the experience of the Philippines (see,
\nfor example, this year's World Bank report, The Philippines:
\nGrowth with Equity).<\/p>\n
First, even with a greatly strengthened civil society, the
\nmajority of the Indonesian population will almost certainly not
\nbenefit as much materially, and seem more likely to suffer
\ndeprivation, compared to the Soeharto years.<\/p>\n
Even with a more equitable distribution of the gains from
\ngrowth, it is hard to imagine that employment expansion will be
\nrapid enough to trigger real wage growth at all, and certainly
\nnot to the extent that occurred in the 1990s prior to the crisis
\n(this is a telling lesson from the Philippine experience of slow
\ngrowth).<\/p>\n
For the poorer 40 percent, this will mean less income for
\neducation and health, as well as transport and other basic needs
\nnecessary to help improve living standards.<\/p>",
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