Muddling on: A country in search of a strategy<\/p>\n
H.S. Dillon, Political Economist, Jakarta and S.R. Tabor,
\nEconomist, Leiden, The Netherlands<\/p>\n
The Jakarta Post daily is hosting a seminar on April 28 on
\nIndonesia's development strategy, part of the daily's
\ncommemoration of its 20th anniversary. Rather than launch a
\npseudo-scholarly treatise, a question and answer approach might
\nbe the most straightforward way of getting at the root of our
\ndevelopment strategy.<\/p>\n
First, what is Indonesia's current development strategy? At
\nbest, it is a hybrid between free market development on the one
\nhand and a large, lumbering, dysfunctional and indebted state
\nwith heavy involvement in mining, industry and finance on the
\nother.<\/p>\n
It remains centralized in a number of strategic spheres, but
\nhas become highly decentralized in most aspects affecting public
\nservices provided to the public. It is still an economy heavily
\nbased on natural resource exploitation and the first-stage
\nprocessing of natural resources (see the barter of rubber and
\npalm oil for Sukhoi fighter jets).<\/p>\n
These, along with trade, continue to be the main sources of
\nincome. It has been an IMF drip-feed economy for the last five
\nyears. Rather than having any meaningful long-term strategies,
\nthe nation has been lurching from one patch-up-the-rot LOI to the
\nnext.<\/p>\n
Moreover, with democratization and decentralization, many,
\nmany different development strategies are being implemented
\nsimultaneously -- and often it is difficult to distinguish what
\nis seriously being pursued from what is being pushed simply to
\nenrich one nouveau-political-elite or another.<\/p>\n
So at the mega-level it is a country still chained to the IV-
\nbottle of the IMF. It is a country being pulled in many
\ndirections by political parties and special interest groups;
\nwhile, at a micro-level it is a country with local government and
\nthe local elite doing their own thing and going in many different
\ndirections.<\/p>\n
Second, does Indonesia really need a development strategy?
\nSome would certainly argue that it does not. The World Bank seems
\nto think that the basics of sound economic policy and good
\ngovernance are known, and the only remaining challenge is how to
\nput those into effect.<\/p>\n
The new development thinking is that \"partnerships\" are what
\nmatter, which means that encouraging many stakeholders to work
\ntogether to solve their common perceived problems is much more
\nimportant than having leaders formulate solutions and put the
\nweight of state and society behind implementation.<\/p>\n
Indonesia certainly has many problems that do need solving: a
\ndysfunctional state; a largely ineffective government and
\nbankrupt private sector; regional rebellions; poverty and
\nwidespread vulnerability; agricultural stagnation; environmental
\ndeterioration, fractionalized money politics and the rise of
\nextremism.<\/p>\n
One must wonder whether \"partnerships\" alone will really be
\nable to tackle this litany of generally agreed upon development
\nchallenges. Related to this is the question of efficiency -- is
\ntapping local knowledge and the positive spillover from
\nparticipatory processes greater than the scale, scope and
\nintertemporal economies likely to result from applying
\n\"strategic\" solutions to these development challenges?<\/p>\n
This is an empirical question and given that both sides are
\nunobservable (we don't know how costly or effective
\n\"participatory process solutions\" will be; nor do we know whether
\nthe right strategies will be adopted) we really can't compare the
\ncosts and benefits of a \"process-based\" versus a \"strategy based\"
\nsolution.<\/p>\n
If, for ease of exposition, one accepts that a \"strategy\" is
\nindeed needed, what then might be some of the key elements? Thus
\nthe third question posed is: How can a strategy help in nation-
\nbuilding? For the past 50 years, keeping the nation together has
\nbeen one of the priorities driving the nation's development
\nstrategies.<\/p>\n
Linking the regions together through trade and investment;
\nadopting a national language, pan-territorial pricing; delivering
\nthe same core public services everywhere; using the security
\nservices to maintain the integrity of the nation state; and
\nfostering \"big\" development initiatives (rice self-sufficiency,
\nindustrialization) to capture the spirit of society were some of
\nthe nation-building activities.<\/p>\n
Part of this was based on the notion that resources and
\nterritory were the real driving forces behind prosperity. The
\nmore minerals, forests, sea and land were exploited, the more
\nprosperous the country would become.<\/p>\n
Well, that has not really worked out. Resource-mining only
\ntook the country so far; it created many opportunities for rent-
\nseeking and rip-offs, and, ultimately, the overexploitation of
\nnatural resources has put Indonesia on the lowest end of the
\ndevelopment totem pole.<\/p>\n
Those countries that develop skills, knowledge and
\norganization to compete in industrial and service markets are the
\nones that have landed on top -- the resource mining countries
\nstill languish at the bottom of the heap.<\/p>\n
More generally, one must wonder whether the unitary state can
\nbe preserved. The Soviet empire has collapsed, and the pieces
\nappear to be doing far better than the whole ever did. The huge
\ndeveloping economies are in a mess -- India, Pakistan, Nigeria
\nare hardly bastions of prosperity, peace or stability.<\/p>\n
China is performing very well, but the gap between the haves
\nand the have-nots is widening, freedom is not yet on offer and
\nthe bankrupt state -- if allowed to go under -- could cause that
\nhouse of cards to collapse.<\/p>",
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