A voyage back to the grandeur of diversity

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.