2002: Is Indonesia entering a vicious or virtuous circle?

Sabam Siagian Editor-at-large The Jakarta Post Jakarta

From the outset of planning the two-day discussion, we, at the newspaper, realized the risks involved in bringing together a group of social scientists, cultural observers and NGO activists, particularly because economists tended to dominate.

Preventing the encounter from becoming an in-house discussion among economists of different schools was quite a challenge for the moderators. At the same time, it was not easy to notify the participants that the aim of the discussion was to look at the Indonesian situation in its entirety and identify whatever opportunities might present themselves in 2002.

It was fortunate that the economists participating in the discussion kept hammering home the importance of a people- oriented economy. In this way they conveyed the fact that, while Indonesia was facing problems both in its banking industry and a crushing debt burden, did not mean that the Indonesian economy was suffering from a severe crisis.

One participant stressed that a great number of small and medium enterprises (SMEs) were still flourishing and that it was their performance that had enabled Indonesia's economy to continue running. He also noted that Indonesian economists relied too much on the neo-classicist theories of Western economists.

To say that he was almost clobbered by the other economists in the room is perhaps overly dramatic. Still, this people-oriented economist managed to excite his colleagues. Submitting data and figures, they argued that unless there was movement in asset sales and privatization, a cleaning up of the banking industry and a favorable rescheduling of the public debt burden by the Paris Club, the impact of the SMEs on the national economy would remain limited, however great their activity. A fellow economist even argued that his data showed that a process of impoverishment was taking place among the people.

The disturbing thought that occurred throughout this two-day discussion was whether the observations and the data presented by the economists were of relevance only for particular parts of Indonesia or whether they were valid for the country as a whole.

One beneficial outcome of this debate on the relevance of a people-oriented economy was that the non-political factors were shown to be important enough for serious discussion. After all, such issues as political reform, the urgency to curb corruption, the need for cultural renewal - in short, the challenge of enhancing the quality of governance in this country -- directly affect the levels of productivity and innovation and provides a valuable experience for the economists participating in the discussion.

Listening to the persuasive arguments and high-quality observations presented by a range of political and social scientists, cultural analysts, political reformers and theologians, it was difficult to become seized by a bout of depression watching the shaping of a gloomy outlook affecting Indonesia in the coming year. They talked about conflicts, not only between ethnic groups or even neighborhoods affected by economic deprivation, but on a higher level between the legislative body and the executive.

The upshot, among other things, was the conclusion that the process of asset sales and privatization, which would help replenish the state coffers and eventually benefit the public at large, has got stuck. The need for accountability and transparency in government operations and political processes was stressed as being part and parcel of the democratization process in this country. Apparently, however, to achieve these goals, embedded traditional values need to be readjusted -- meaning such habits as the unquestioning acceptance of authority.

These traditional values were actually reinforced near the end of the regime of former president Soeharto, who managed to create a neo-feudalistic system. It was also pointed out that one of the important factors that has helped to fan long-festering conflicts, be it in Aceh or in Maluku, was the fact that previously existing local institutions for peaceful conflict resolution have been destroyed.

One participant argued vigorously for total reform of the Constitution, which he regarded as an absolute necessity for building a new Indonesia. Without such a systemic overhaul, he believed it was nonsense to talk about reform in Indonesia. He also argued that the drafting of a new constitution should be entrusted to a separate body elected on the basis of a more democratic election law and should not be done by the People's Consultative Assembly (MPR), which would merely patch up the existing 1945 Constitution with amendments.

I could not help but recall the grave situation at the end of the 1950s, when an elected constituent assembly, which convened in Bandung, failed to reach an agreement due to sharp differences regarding the foundations of the state. The country was already weakened by a serious regional revolt aided by foreign powers and declining export prices of its main commodities. The situation was further aggravated by the West Irian problem, with negotiations headed toward a deadlock at the United Nations. It was therefore not surprising that President Sukarno, with the support of the Army under General A.H. Nasution, unilaterally decreed a return to the 1945 Constitution. That spelled the end of a serious attempt to draft a new constitution for Indonesia.

Does this mean, however, that more than 40 years after the event, Indonesia, with a sluggish economy and raised poverty line, is strong enough to cope with the intense experience of drafting a new constitution?

Is it this sort of vicious circle that Indonesia will enter in the coming year? The country is beset by a host of problems. The banking industry is in disarray, the country is bent double under a tremendous debt burden that needs to be serviced; government operations move slowly, in part because of the intrusiveness of the legislative body, in part because of the implementation of a regional autonomy law that is subject to a variety of interpretations, but also because of the inherent indecisiveness within the upper echelons of the government.

Surprisingly, during the last hours of the two-day meeting, when all the participants were asked to sum up their views succinctly, a mood of very cautious optimism became evident. I do not think it was a case of a need to brighten up the atmosphere, driven by guilty feelings after painting such a gloomy picture.

One young economist known for his sharp analyses ventured that barring some calamities the country's economic growth could reach a level of at least 3.4 percent this year and possibly even approach the 4 percent mark - hardly adequate to absorb the millions of Indonesian job seekers, but at least high enough to provide a leeway for the country.

Another participant noted that the sociocultural fabric of the nation is sill basically intact and that the capacity for reconciliation in areas affected by armed conflict is not totally destroyed, an inspiring state of affairs on condition that the government can provide a firmer and more visionary leadership. The hour was rather late when the problem of leadership was touched upon -- and that actually was at the core of the problem, which might possibly warrant another meeting.

President Megawati Soekarnoputri, who controls the largest party and who is likely to continue to have the support of the majority of parties in the national legislature until the 2004 elections, should be able to inspire the nation and instill in her government the resolve to attain the objectives of economic rehabilitation, political reform and the restoration of social order based on a clear scale of priorities. She actually could charm members of the legislative body by conducting regular consultations in order to push through the necessary legislation.

In short, the two-day discussion conveyed the message that opportunities are still there for Indonesia to grasp as it prepares to enter a virtuous circle in the coming year. This is all provided there is a gradual straightening out of the banking industry, a speeding up of asset sales and privatization and a better working relationship between the executive branch and the legislative body, the enhancement of nationwide public security, and a continuous curbing of corruption, which would make government agencies more responsive to public needs.