A voyage back to the grandeur of diversity

By Djisman S. Simanjuntak

JAKARTA (JP): During the Age of Commerce, the archipelago, which later became Indonesia, was home to a thriving diversity where kingdoms competed with each other for the goodwill of alien traders and travelers by offering the best spatial advantages.

None of them survived the guns, steel and the clever trick of "divide and rule" of the Dutch who introduced and maintained a centralized administration without a shared destiny to the diverse people of the lands below the winds.

At the time of independence, the new Republic of Indonesia was given a constitution of a strong state with an undefined control of the earth, sea and air space, and the wealth treasured therein.

In those days a socialist constitution with a strong state was practically the only option left for people who were fighting for independence from centuries-old colonialism.

Faced with different groups of rebels and ideological divide in the cold war era, the project of nation building under Soekarno's leadership stranded in a powerful central government.

The centralization of political power peaked in the last days of Soeharto's presidency. In the course of the last 400 years, local governments were reduced to a mere extension of the central government.

The centralization relied on a wide range of instruments.

Under Soeharto, important appointments of local government officials were made in Jakarta. Local government finances were made totally dependent on the transfer from the central government. A large portion of government expenditures was also channeled through presidential projects.

Through industrial activism, the central government decided on which industries should be pushed forward where. This industrial activism reinforced the centralization implied in the control of natural resources.

Exercised through state enterprises, the industrial activism and the control on natural resources left practically no room for local governments to codetermine the policies relating to the nontraditional sectors of their respective economies.

Business suffered from the same symptoms of centralization. Entrepreneurial and professional talents from far away places were all sucked to Jakarta in which powerful central offices were established. Jakarta became a "black hole", unmatched in every way by other urban centers.

What Indonesia is dealing with, as it plans to launch regional autonomy on the first day of 2001, is a deeply petrified central government.

The collapse of the Stalinist model of development clearly demonstrates that excessive centralization is harmful to economic development. This model was, admittedly, never transplanted to Indonesia.

However, the central government of Indonesia has also gone in its own way, far beyond the limits of a sustainable centralization. As a result, substandard practices of governance, including "large scale corruption", propagated voraciously.

At least two provinces, namely Aceh and Irian Jaya, have found such centralization inhospitable and have expressed the desire to become independent.

The link between a highly centralized and corrupt government on the one hand and poor economic performance on the other is yet to be studied empirically in the context of Indonesia. Increase in location costs is one. Low speed in policy decision and implementation is another. Lack of spatial competition may have also contributed to an inefficient allocation of resources.

The vulnerability of the Indonesian economy to external shocks, which have repeatedly thrown Indonesia back to low-income status, might have been reduced had local governments been allowed to act more autonomously.

The fact that Indonesia has lagged farther and farther behind its East Asian neighbors, including China, after a relentless competition over the last 45 years or so, is partly attributable to excesses of centralization.

Weaknesses

As of 1 January 2001, Indonesians will be engaged in a new undertaking to rediscover the strengths of diversity that are burrowed beneath an excessively centralized government.

While the people's expectation has risen, that the redefined relationship between the central and local governments would serve as a booster to economic development, one has to caution against euphoria that may backfire in case people get disillusioned.

The environment under which regional autonomy will have to proceed is anything but ideal. The Republic of Indonesia can only count on limited strength but suffers from countless of weaknesses.

The greatest opportunity lies in the vibrant economies of the Asia Pacific.

The global production system, which has developed in the Asia Pacific region is spacious and dynamic enough to accommodate new players. The geographical distance between the major centers of this vast region and the urban centers of all provinces of Indonesia is short.

Catering to this vibrant region, some provincial cities can be upgraded into "multifunction cities" in which trade, investment, tourism and other services mutually reinforce each other to produce an economic vigor, provided that these cities can craft specific location advantage.

Such internationalization takes time to materialize, however. In the near future local governments may have very little to offer to the rest of the world other than their natural resources.

Unfortunately, resource-based advantage cannot be sustained for a long time. In many cases the resources have, in fact been depleted to a large extent or even exhausted.

In case they are still available in relative abundance, as they still are in a few provinces, exploitation would likely exacerbate the problems of an enclave economy to the dislike of native population.

Furthermore, growth in developed economies has uncoupled from a rising material intensity, especially in recent years with the rise of the new economy. Therefore, it is rather disconcerting to find out that endowment with natural resources has received the greatest attention in the ongoing debates on regional autonomy.

If natural treasures were efficacious in producing a lasting growth, Indonesia would have long been catapulted into a prominent place in the world's development ladder. Of the few economies which graduated in the postwar period, none is considered a resource-rich economy.

Once other ingredients of location advantage are taken into account, the picture of comparative location advantages between provinces look less frightening. For this purpose I estimated a Composite Index using six subindices for 26 regions.

The six subindices comprises:

(1) Per capita number of firms with a workforce of 20 or more as an indicator of corporate capital;

(2) Life expectancy as an indicator of health;

(3) Population and land area weighted by the fraction of urban population to total population as an indicator of endowment;

(4) Poverty-weighted per capita Gross Domestic Regional Product as an indicator of market attractiveness;

(5) Years of schooling of the population in the age group of 15 years and more weighted by population in the same age group as an indicator of intellectual capital;

(6) Per capita foreign direct investment as an indicator of openness.

In each of the subindices, highest score is assigned the value of 1 (one). To obtain a composite, the six subindices are assigned a weight of 0.2, 0.05, 0.1, 0.3, 0.2, and 0.15 respectively.

Jakarta leads the rank at 0.99 followed by East Kalimantan at 0.89, Bali at 0.85, Riau at 0.84 and West Java at 0.82. At the other end, the East Sunda Islands ranks lowest at 0.59 after Central Sulawesi at 0.64, Southeast Sulawesi at 0.66, Lampung at 0.67 and Moluccas or Maluku at 0.69. Irian Jaya and Aceh rank 11th and 16th respectively.

Irian Jaya suffers from a low density of firms, dispersion of population in rural areas, high fraction of poor population and low educational attainment. Aceh's rank is pulled downward by a low density of firms, dispersion of population in rural areas, and low per capita foreign direct investment.

The seriousness of the gap is somewhat concealed by the numerical indices, because of the use of logarithm. A better picture might be gained, if elements of social capital such as freedom of individual citizens, trust, tolerance and social cohesion were included.

Nevertheless, the composite index, however imperfect, provides a more balanced picture of the starting condition in each of the 26 provinces.

Threat

External threat is perhaps of little relevance to the future of regional autonomy in Indonesia. Some investors may have preferred the old simple way of dealing with a domestically strong central government to an unproven relation with local governments. Some others may have been scared of the anticipated chaos during the transition to regional autonomy.

However, such reaction is temporary in nature. The rest of the world is more interested in certainty about which government to turn to when dealing with certain issues.

Of more immediate relevance are the threats of domestic origin. Domestic security remains fragile, to put it mildly. Emotions are running high. Self-proclaimed guards, cloud the security environment. A plethora of crimes are committed with impunity. The government does not seem to have a good leverage when dealing with the independence movements in Aceh and Irian Jaya. Indonesia as a single economic area is also suffering from different symptoms of disintegration.

To generate additional revenues, new levies on transregional flows of goods and services are imposed on various localities. The presidency of Abdurrahman Wahid is exposed to ceaseless controversies. Progress in law enforcement is lacking. The reputation of the law has sunk into an abyss.

Signs of success in combating corruption are nowhere in sight. In fact, worries have been expressed that along with regional autonomy, corruption would move down to lower levels of government, though such a more "dispersed corruption" is probably less costly and less harmful than the highly concentrated corruption of the past.

Trust is at its nadir. Even today local government officials are still doubtful on the commitment of the central government to decentralization while central government officials convey the impression that their part of the preparation has almost been completed.

Disputes between the central government and autonomous regions are likely to mount because of the perceived defects in the design of the regional autonomy policy and different interpretations of the relevant laws and regulations.

Local governments are confronted with quarrels of their own. Election of a governor or a regent has proved in some cases anarchic. The head of a local government may be forced to spend most of his or her time pleasing the local parliament.

In the current design of regional autonomy, the provincial government is trapped in an awkward position. Does it represent autonomous regions in dealing with the central government or the other way around?

Finally, regional autonomy has been known for a long time in Indonesia's political vocabulary. Its failure to make a difference in the relationship with the central government has stained its reputation.

All these weaknesses will have to be overcome at a time when the Indonesian economy is greatly handicapped by the severe economic damages left by the deep crises of the last three years.

Rather than delaying the implementation of regional autonomy, as some politicians have suggested, the risks associated with a somewhat tumultuous transition are widely considered to be worth taking.

The next question is, therefore, how to maximize the probability of success under the extremely difficult circumstances described earlier.

A new vision will have to be formulated and communicated clearly to all citizens, notably the ones with influence. The old approach to unity, which relied on an incontestable central government, has ironically led to disintegration.

A new approach that emphasizes mutual dependence as glue between diverse regions will have to be laid down. Such an immense change requires a strong coalition of champions, which in turn can only be sustained under the direction of leaders with unquestionable integrity, strong intellectual and social capitals, and civil courage to face a stormy transition.

It is these leaders that the citizens expect to reposition their respective regions in a credible way.

A region can for instance be projected as "a home of peace and stability in freedom, one that upholds the supremacy of the law, nondiscriminate, having superior human resources, showing openness and having an uncompromisingly clean government".

Regions that come up the earliest with such a repositioning can expect to be reciprocated handsomely by entrepreneurs and professionals from different walks of life.

Winners

By definition, winners are limited in number. However, a sustaining spatial competition would end up in all regions offering the best possible conditions.

In a unitary state of over 200 autonomous regions, a "Tower of Babel" is a distinct possibility. Two or more regions may quarrel about the sharing of benefits that emanate from resources that lay across a border such as a river, a lake, an oil concession or a forest concession.

Likewise, one region may benefit from a particular project, such as a manufacturing establishment, while another may suffer from the pollutants from manufacturing process which are dumped in its backyard. Legal instruments issued by different levels of government may contradict each other.

To deal with such a "Tower of Babel", existing institutions will have to be empowered and new ones may have to be set up. They include a neutral "Dispute Settlement Body" which can mediate on technical disputes. And perhaps a "Constitutional Court" which can decide on whether a law or a regulation is in line with the existing constitution.

Mature political parties will increasingly be indispensable. Success or failure of regional autonomy as a chosen vehicle to rediscover the grandeur of diversity will ultimately depend on the pace at which political parties groom people who can lead, in contrast to people who merely vegetate in the labyrinthian world of vested groups.

Regional autonomy is not a substitute for central government. A viable nation needs a certain level of centralization. In fact, such centralization was sealed in China of the old days as well as the United States of America and Australia in recent times at enormous suffering. Such a coercive approach to centralization has become a nonoption in today's world.

However, regional autonomy that amounts to dismantling the single economy of Indonesia is doomed to cause more harms than blessings.

Indonesians are well advised to learn from the tireless effort of the two Koreas to reunite into one republic, the caution that Taiwanese exercise before making a statement on political independence, the unification of Europe and the exploration of a more integrated Asia Pacific.

In the merciless global competition, size does count. On the other hand, regional autonomy would be an empty shell, unless it is translated into greater freedom of individual citizens.

There is no purpose of having regional autonomy, if it is a mere replication of an excessively centralized government on a more limited space.

Freedom is a virtue that Indonesians have tended to connote with evils to justify its derogation. This allergy to freedom is unnecessary. There is no such a thing as a freedom without boundaries.

Freedom has always been a narrow passage between the tyranny of genes and the tyranny of the cultural "memes" (the particles of culture). Once powerful politicians start tinkering with the freedom of individual citizens, the risk of it disappearing altogether is fairly high.

What matters is finding the right balance that one may call an order at the edge of chaos, which is the best habitat for life to thrive. Anchored on such an order, the productive forces of autonomous regions would be unleashed while keeping a certain level of unity, which is imperative for a nation to survive.