Technocrats dodge economic medicine ball<\/p>\n
James Castle, Castle Group, Jakarta<\/p>\n
It has always been a puzzle to foreign observers why
\nIndonesia's economic technocrats have not done more to socialize
\nthe virtues of the economic principles underlying their recovery
\nproposals.<\/p>\n
Most investors feel that true economic liberalization in
\nIndonesia began with strategic bank reforms and the removal of
\nmany restrictions on foreign investment in the 1980s.<\/p>\n
In fact, the basic principles of the \"Berkeley Mafia\" which
\nhave provided the core thinking for the economic policies since
\nthe 1960s, strongly support investment and trade liberalization.<\/p>\n
It was, after all, the team of technocrats led by the
\nlegendary Widjojo Nitisastro and including such stellar
\ntechnocrats as Ali Wardhana, Emil Salim, Subroto, Muhammad Sadli
\nand many others, which slowly turned the country's economic
\nregulatory environment away from the socialist principles of
\nSutan Sjahrir and Wilopo, and prepared the way for Indonesia's
\nhighly beneficial entry into the global economy.<\/p>\n
It is almost as if, having won the intense debate on economic
\nprinciples and priorities among Indonesia's elite in the 1960s,
\nthe winners felt their concepts were too complex or confusing for
\nthe Indonesian masses.<\/p>\n
Consequently, they preferred to implement economic change by
\nstealth rather than openly confronting the socialist dogma of the
\ncountry's founding fathers.<\/p>\n
This is not to attack the social ideals of the Indonesia's
\nrevolution.<\/p>\n
A doomed romantic socialism was de rigeur for much of the
\nanti-colonial independence movements in the first half of the
\nlast century, and has only recently been seriously challenged in
\nIndia, the world's largest democracy.<\/p>\n
This is not the place for a detailed analysis of the struggle
\nof economic ideologies in Indonesia's traumatic transition in the
\n1960's from Soekarno's Old Order to Soeharto's New.<\/p>\n
Those wishing to pursue the subject can do no better than read
\nJohn Bresnan's excellent, Managing Indonesia: The Modern
\nPolitical Economy (Columbia University Press, 1993).<\/p>\n
The question is: Why did the brilliant architects of
\nIndonesia's modern political economy, having vanquished their
\nintellectual opponents and taken control of the government's
\neconomic planning apparatus, shrink from the task of explaining
\nwhat they were up to the people?<\/p>\n
It appears they were afraid to communicate their policies and
\nideas because they felt if the average Indonesian knew that they
\nwere doing, they would reject the development strategy.<\/p>\n
Some of this reticence was probably also due to the Soeharto
\nstyle of government. Perhaps it was really necessary, as Bresnan
\ntheorizes, that \"Widjojo's long influence with Soeharto [was due]
\nto his policy of avoiding public exposure.\"<\/p>\n
In any case, the country paid a very high price for this
\nfailure, as the influence of the technocrats rapidly waned in the
\n1990s.<\/p>\n
The economic principles of the Soeharto family and cronies
\nbegan to take precedence over the more prudent policies of the
\nprofessional economists. This change was a direct cause of the
\nhorrendous impact of the 1997 Asian economic crisis here that
\nhurt Indonesia so much more than others.<\/p>\n
Still, one cannot dispute the success of the policies that
\nserved Indonesia well, far into the early 1990s. Until the crash
\nof 1998, poverty declined, incomes grew and life expectancy
\nincreased.<\/p>\n
These same principles underlie Indonesia's recent Letters of
\nIntent to the International Monetary Fund, the strong support of
\nthe ASEAN Free Trade Area and the reduction of duties to amongst
\nthe lowest in the world.<\/p>\n
And they are fundamentally sound.<\/p>\n
These open market principles have brought prosperity to those
\ncountries that have embraced them the most firmly, from the
\nAmericas through Europe into Asia.<\/p>\n
Despite the soundness of their views and the demonstrable
\npositive impact they have had, however, the current economic
\nleadership still seems to feel that its job is to form an
\ninternal consensus and lead from behind.<\/p>\n
This strategy may have been necessary in the cloistered and
\nautocratic days of the Soeharto government, but it simply cannot
\nwork in a democratic environment with a free press.<\/p>\n
Indonesian officials can no longer serve the country well if
\nthey are content to hide behind the gray walls of bureaucratic
\nindifference and elitist arrogance.<\/p>\n
A democratic government cannot rule by stealth. It must
\ncommunicate clearly and continuously.<\/p>\n
Any government wishing to lead a democratic Indonesia out of
\nits current economic quagmire must build a public constituency
\nfor the ideas of an open investment and trade regime and a broad
\nfree market orientation where the government concentrates its
\nresources on basic education and health care for the poor and
\nleaves most other matters to the private sector.<\/p>\n
It must regulate, but not own, essential public
\ninfrastructure.<\/p>\n
It is certainly true, as was frequently asserted during the
\nrecent meetings of the Consultative Group on Indonesia, that
\nphysical security, legal certainty and an honest judiciary are
\nessential to long term economic well-being.<\/p>\n
But these are all items that will take years if not
\ngenerations to accomplish.<\/p>\n
Meanwhile, the government desperately needs to build public
\nsupport for its commitment to privatize state-owned enterprises,
\nseek foreign investment to rehabilitate and expand the country's
\ndecrepit infrastructure, particularly in power and
\ntelecommunications but also in air and seaports.<\/p>\n
Indonesia simply does not have the capital formation and the
\ntechnical know-how necessary to leapfrog over its current poverty
\ninto the increasingly competitive global arena without
\nsubstantial foreign capital.<\/p>\n
There are those who resent this imperative and oppose attempts
\nto respond.<\/p>\n
They are wrong, but if they win the current policy struggle,
\nIndonesia will fall further behind and condemn future generations
\nto inferior living standards.<\/p>\n
Thus, it is imperative that Indonesia develops a climate that
\ncan mobilize private sector funding and foreign direct
\ninvestment.<\/p>\n
This is not a bad thing.<\/p>\n
Foreign investment is not a necessary evil. It is a positive
\ngood. Indonesia's economic leaders have long realized this.<\/p>\n
This having been said, it must be recognized that while
\nforeign investment is a positive good, it does not come without
\nrisks and problems.<\/p>\n
Most importantly, it carries an emotional and political charge
\neverywhere it occurs.<\/p>\n
The fact that it is Indonesia's only hope for recovery does
\nnot eliminate the emotional and political opposition it
\ngenerates.<\/p>\n
The emotional concerns can only be alleviated and the
\nopposition defeated by a conscious, committed program of public
\ncommunication.<\/p>\n
It is now time for the economic leadership to trust the
\nIndonesian people and provide them with clear, concise public
\nexplanations of the principles they espouse privately and which
\nunderpin their policy hopes for economic recovery.<\/p>\n
These explanations must emphasize that such policies are good
\nfor every Indonesian who is not a rent-seeker or corrupt
\nofficial.<\/p>\n
These policies will create jobs for all Indonesians. They will
\nalso create opportunities for education and advancement that
\ndepend more on ability and less on political connections or
\npowerful relatives.<\/p>\n
I believe most Indonesians will embrace these ideas and the
\nnew generation of economic leaders and philosophers will be able
\nto accomplish the short-term successes that are essential to
\nrapid economic recovery with the full support of the Indonesian
\npeople.<\/p>\n
These short term successes include the sale of state
\nenterprises, the restructuring and sale of assets under the
\nIndonesian Banking Restructuring Agency, the reform of the Tax
\nDepartment, the establishment of a viable banking system
\ndominated not by large state banks, but by dynamic private sector
\nbanks both foreign and domestically owned.<\/p>\n
These are the economic goals espoused in private by the
\ncountry's economic leadership. It is time they fought for them
\nin the public arena.<\/p>\n
Indonesians from all socio-economic strata demonstrated their
\nfundamental understanding of the principles of democracy,
\nfairness and equity by their behavior in the free and fair
\nelections of 1999.<\/p>\n
The economic technocrats should have confidence that, if they
\nexplain their principles and their goals to the public as
\npassionately as they once did to defeat the proponents of
\nsocialists and communist economic theory in the 1960s, they will
\ntruly transform Indonesian society and create the conditions for
\nenduring prosperity.<\/p>",
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