2002: Is Indonesia entering a vicious or virtuous circle?

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.