Mutual distrust hurts economy<\/p>\n
Panelists at the business forum, which is being held as part
\nof the current national congress of the Indonesian Chamber of
\nCommerce and Industry (Kadin), raised fundamental issues which,
\nif not adequately addressed, could hinder new investment,
\nbusiness development and consequently economic growth.<\/p>\n
Andrew Steer, the World Bank country director for Indonesia,
\nobserved that the government had little trust in the business
\ncommunity. Businesspeople, he added, are not confident that the
\ngovernment is on the right path, in terms of policy reform. The
\nlack of business trust in the government, especially in regard to
\nits consistency and fairness in law enforcement, was the main
\nfactor that distinguished economic recovery in Indonesia from
\nthat of other crisis-hit Asian countries (Thailand and South
\nKorea).<\/p>\n
What Steer had perhaps wanted to assert was that the acute
\nlack of business trust in the government had partly been
\nresponsible for the slower economic recovery in Indonesia than in
\nother crisis-ridden Asian countries.<\/p>\n
Another panelist at the forum, John A. Prasetio, chairman of
\nErnst & Young, shared Steer's views, pointing out that the
\nrelationship between the business community and the government
\nhad been marked by mutual suspicion and distrust. The government,
\nPrasetio said, tended to see businesspeople as \"thieves\" while
\nbusinesspeople were wary of the government, considering it
\ntechnically incompetent in dealing with business affairs.<\/p>\n
These observations are of great concern, because, as
\nCoordinating Minister for the Economy Dorodjatun Kuntjoro-Jakti
\nhimself noted at the same forum, mutual trust should be the
\nfoundation of cooperation between the business community and the
\nwhole government (executive, legislative and judicial branches).<\/p>\n
Many researches have concluded that modern institutions, such
\nas contracts and commercial laws, are necessary to facilitate a
\nmarket economy that functions properly. But these are not
\nsufficient in themselves, and without trust, the whole process is
\nrendered inefficient.<\/p>\n
The presence of trust as an additional component of relations
\ncan increase economic efficiency by reducing the costs of
\ntransactions, as there is less need to draw up lengthy contracts,
\nless need to hedge against unexpected contingencies, less need to
\nlitigate in case of dispute.<\/p>\n
To our knowledge, the business gathering was the first
\nofficial, public occasion where business leaders, ministers and
\neconomists from multilateral agencies, such as the World Bank,
\nexplicitly acknowledged the acute lack of mutual trust between
\nthe government and the business community.<\/p>\n
Businesspeople have increasingly suffered the brunt of the
\nfallout with the government, especially after the outbreak of the
\n1997 economic crisis, which was blamed mainly on collusion
\nbetween the (then Soeharto) government and bad conglomerates.<\/p>\n
The government's sweeping distrust of most businesspeople has
\ncertainly increased the cost of doing business. Take for example,
\nthe field of taxation whereby the government tends to treat most
\ncorporate taxpayers as cheaters bent on evading tax obligations.
\nEven though the tax laws apply a self-assessment system, this
\nmechanism hardly works because taxpayers remain subject to tax
\naudits at the whims of tax officials.<\/p>\n
So dreadful have the tax problems been in Indonesia that State
\nMinister of State Enterprises Laksamana Sukardi, also a speaker
\nat the business forum, cited uncertainty in tax law enforcement
\nas the biggest barrier to foreign investment in Indonesia. He
\nconcluded that this problem was more horrendous than security and
\nlaw enforcement problems.<\/p>\n
Distrust has often led to the harassment of businesspeople
\ndealing with customs procedures, or in the process of conforming
\nto the regulations, as they are constantly under suspicion of
\ncheating or violating laws. No wonder, both the tax and customs
\nservices have been perceived by the people as the most corrupt
\npublic institutions. Yet more damaging to the business world is
\nthe increasing number of businesspeople that have lost faith in
\nhonesty as a tool in dealing with the government.<\/p>\n
This is not to imply that all businesspeople are honest and,
\ntherefore, should not be subject to supervision or scrutiny
\nwithin the regulatory system. But effective supervision is a far
\ncry from distrust and inordinate suspicion.<\/p>\n
Both the government and businesspeople have been trying to
\nresolve the problem of mutual distrust through the development of
\ngood governance practices in the public and private sectors, but
\nmore concerted efforts are needed to speed up the process.<\/p>\n
The enhancement of practices of good governance is the most
\neffective way of building trust, because the old mind-set has
\nprimarily been generated by the public's perception of pervasive
\ncorruption within the government in collusion with the private
\nsector.<\/p>\n
In this context, it is worth recalling the Kadin declaration
\nof a national anticorruption drive last October. The current
\nKadin national congress is also quite an opportunity to reiterate
\nthe urgency of this problem of trust, as a new board will be
\nelected to lead the business community within the next five
\nyears.<\/p>",
"url": "https:\/\/jawawa.id\/newsitem\/mutual-distrust-hurts-economy-1447893297",
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"sponsor": "Okusi Associates",
"sponsor_url": "https:\/\/okusiassociates.com"
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