Part 2 of 2 Muddling on: A country in search of a strategy<\/p>\n
H.S. Dillon, Political Economist, Jakarta<\/p>\n
S.R. Tabor, Economist, Leiden, The Netherlands<\/p>\n
Tension has emerged between democracy, human rights and the
\npreservation of the nation-state at all costs. Rather than
\nthinking of Indonesia as a sort of forced entity, perhaps it is
\ntime to rethink the rules for this \"nation\" as a club, where
\nmembers wishing to leave should have the possibility to do so.<\/p>\n
National development policies, rather than being devised in a
\nway so as to bribe or force everyone to stay in the club, should
\nbe devised so as to make the nation the sort of place each
\ncitizen wishes to remain a part of.<\/p>\n
Making Indonesia a great country, in which everyone has a
\nplace under the sun, is a way of making the club attractive. Who
\nknows, perhaps if Indonesia were to do very well in the future,
\neven Singapore and Malaysia might want to \"join\".<\/p>\n
Now, let's turn to the question which enamors mainstream
\neconomists: What about growth? Despite all the rhetoric, there is
\nno substitute for high rates of economic growth. Deliver this,
\nand many other problems will simply fade away.<\/p>\n
Two decades of China-like growth and Indonesia would be as
\naffluent as many European states. The question, though, is how to
\nget from here to there. A few elements are well established.
\nHigh rates of productive private sector investment are needed to
\ndrive that process. Improvement in skills and health conditions
\nare needed to develop a labor force that can create its own
\nopportunities for progress.<\/p>\n
Without business confidence and a big-leap in human resources,
\nhigh rates of growth just won't happen. What is needed to
\nrestore business confidence -- who knows? There are long lists
\nand there are short lists. Eliminating the debt overhang --
\npublic and private -- can't hurt, and this means something other
\nthan the never-ending cycle of rescheduling.<\/p>\n
Deregulating where possible and seriously penalizing
\ncorruptors can't hurt, and getting government out of the
\nbusinesses (banking, etc.) that it was forced into after the
\nfinancial crisis also couldn't hurt.<\/p>\n
It is probably high time to take a respite from foreign
\nassistance -- the mega-project days of the New Order fueled waste
\nand corruption; the IMF-tutelage days of fragile democracies have
\nbattered confidence and tarnished the nation's reputation.<\/p>\n
Maybe it is time to put our own house in order. That could
\ncertainly help to rebuild confidence.<\/p>\n
Critical social scientists often ask: What about poverty and
\nequality? The answer is quite simple -- rural development. That
\nis where the poor are, and that is exactly where markets --
\nglobal, national and local -- are not working well.<\/p>\n
Getting agriculture moving will require a \"fair trade\" policy,
\nand that means that the cheapest possible food is not in the
\nnational interest. It means that farmers will need to combine to
\nform viable businesses, and that public\/private cooperation for
\nresearch, extension and marketing is crucial.<\/p>\n
It means that the \"rule of law\" will have to work in the
\ncountryside, otherwise contract-farming would simply be a joke.
\nIt means that rural assets will need to become bankable
\ncollateral, starting with land.<\/p>\n
It means that low-cost rice will need to become a thing of the
\npast in Java, with the countryside filled with flowers, shrubs
\nand other high-cost (high value) products. It means that workers
\nwill need to have ownership stakes in the estates, a la FELDA,
\nand that the days of feudal overlords running rural communities
\nwill be put behind us.<\/p>\n
The key variable is rural income -- not commodity production,
\nand the faster we can raise rural income the better for poverty
\nreduction, equality and structural change.<\/p>\n
Now, an issue dear to our hearts: What about \"good
\ngovernance\"? Many of Indonesia's problems stem from the sad fact
\nthat it has a dysfunctional state. Collective goods are either
\nmissing or are being provided in a bad way.<\/p>\n
Many collective goods -- like the \"rule of law\" -- are
\ncertainly under-provided or ineffectively provided. Other
\ncollective goods -- like health and education -- have extensive
\ncoverage but are of such a distressing quality that the services
\nprovided really are hardly worth their cost.<\/p>\n
Anarchy is certainly not an option -- despite what those who
\nare fond of \"doing-your-own-thing\" partnerships might suggest.
\nThe costs of trying to coordinate masses of people with differing
\nspecial interests is simply far too great without a government
\nthat undertakes to provide \"good\" collective goods.<\/p>\n
During the past five years, we have somewhat rushed to apply
\nvarious \"fixes\" to Indonesia's legendary governance problems.
\nThere are certainly some signs of progress, but not enough to
\ninspire all that much confidence.<\/p>\n
This is clearly an area in which there is scope for
\nexperimentation, for we really don't know what exactly will work.
\nWhat will eradicate corruption? What will inspire integrity in
\nour leaders? What will inspire political parties to act
\nresponsibly? What can be done to ensure that public services are
\ndelivered effectively and efficiently?<\/p>\n
Indonesia's experience proves that \"good governance\"
\ninitiatives that worked in other countries don't necessarily work
\nterribly well in this setting.<\/p>\n
Two clear lessons are emerging: some things simply can't be
\nfixed, and we need to start over. For example, \"central
\nplanning\" got out of control, and while it was rather brazen the
\ndecentralization effort was an effort to start over.<\/p>\n
There may well be other areas where \"governance\" simply can't
\nbe fixed, and where the best solution may be to flush away what
\nwe have and start over. Does the judiciary work? Has the way we
\nelected leaders worked, and can we convince the parties to
\npractice good governance and field honest, accountable, proreform
\ncandidates in the next elections?<\/p>\n
Can we have good governance with the way civil servants are
\nselected and paid? Maybe starting over makes sense in some
\nareas. The other finding is that \"imported prescriptions\" don't
\nseem to work terribly well in this area.<\/p>\n
What we do need to do is find homegrown solutions to getting
\ncollective goods provided effectively and efficiently. If this
\ntakes \"command solutions\", \"participatory solutions\" or thousands
\nof different initiatives, so be it.<\/p>\n
What matters most at the end of the day is that we have decent
\ncollective goods, that human resource development takes place and
\nthat economic and social development is built on a crescendo of
\nrising equity, productivity and prosperity.<\/p>\n
With the underpinnings of a strong economy equally benefiting
\nall, Indonesians could even rediscover their national identity,
\nand once again walk with dignity. Then the sacrifices made by
\nthe founders of this great country will not have been in vain.<\/p>",
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