... and expert urges 'some form of federalism'

LONDON (JP): Indonesia needs to adopt some form of fiscal and political federalism if it wants to survive as one country, economist Anne Booth says.

While acknowledging the historically poor image of the concept among Indonesians, the professor at the School of Oriental and African Studies said there are many forms of fiscal and political federalism being practiced in the modern world.

Indonesians, however, will have to think very carefully which variant is likely to be most suitable for them, said Booth, who has observed Indonesia for more than 20 years and written books on the Indonesian economy.

Booth argued the tendency among many people to blame the policies of Soeharto era for all Indonesia's current woes -- including the growing demands for separation -- was out of place.

"I don't think that the regional policies pursued over three decades from 1968 to 1998 can be judged as failures," she said.

"Certainly they resulted in a highly centralized system which had, at least by the latter part of 1980s, become dysfunctional, in that it encouraged the growth of corruption at the center while at the same time stifling genuine development initiatives in the regions."

She went on to discuss Soeharto's policies over the years which neglected certain regions. "Eastern Indonesia has benefited little from any of the three main forms of industrialization since the early 1970s," she said.

Import-substitution industrialization has been mainly based in Java, especially Jakarta and West Java, in order to benefit from the large market concentrated in the most affluent part of the island.

The growth of export-oriented industry has also been based in Java, to take advantage of both superior infrastructure and abundant reserves of cheap labor. Resource-based industrialization has, for obvious reasons, been concentrated in those provinces which are well endowed with oil, gas and minerals.

Although Indonesia is considerably poorer than either Singapore, Brunei, Malaysia or Thailand, some regions in Indonesia are among the wealthiest in the Southeast Asian region, Booth said. East Kalimantan, for instance, had in 1985 a per capita GDP exceeding that of Bangkok and Central Malaysia.

She revealed that a study of 1985 data on 48 regions in Indonesia, Malaysia, the Philippines and Thailand showed that eight Indonesian provinces were among the richest 20 regions. These were East Kalimantan, Riau, Aceh, Jakarta, South Sumatra, Irian Jaya, Central Kalimantan and Bali.

"However, all of these regions, except Jakarta, ranked much lower in terms of per capita consumption, the main determinant of living standards, than they did in terms of per capita GDP."

The extreme case, she said, was and remains Irian Jaya (West Papua), which ranked sixth in terms of per capita GDP in Indonesia in 1985 and 14th in the ASEAN region, but was one of the poorest regions in terms of per capita consumption expenditures.

"Even poorer than Bicol in the Philippines or East Timor," Booth said.

"Indeed the most recent published evidence (from the 1996 Household Expenditure Survey from the Official Statistics Office), indicates that the incidence of poverty in rural West Papua is now higher than in any other province of Indonesia, except for West Kalimantan and (the former) East Timor," Booth said.

Over the 1990s, frustration with these policies became greater, especially, but not only, outside Java. "But (overall) the achievements were real, in terms of improved infrastructure and improved implementation capacity," she said.

Soeharto's critics and "especially those who feel that Indonesia took a wrong turn in 1950 when the federal option was dropped in favor of a unitary state" should ponder what might have happened had a federal constitution been adopted.

"We don't know what fiscal arrangements would have been pursued within a federal framework, but if the provinces with the greatest resource wealth had been able to keep a high proportion of the rents from the exploitation of their natural resources, the economic history of Indonesia between 1950 and 2000 would certainly have been very different," she said.

"This is not an argument against federalism. In fact, adopting some form of federalism will be essential for Indonesia," she said. However, whether or not Indonesia moves further down the road towards federalism, it is important that Indonesia does not lose sight of the key problems facing those regions that are poor and backward, she said.

Although she had a list of criticisms for the new Law No. 22 on regional autonomy and Law No. 25 on fiscal balance, Booth believed that these enactments could pave the way for a debate "whose resolution will determine both the economic and political future of the country over the next 50 years and beyond."

"If the diverse populations of Indonesia's many regions are given greater autonomy to pursue their own religious beliefs, educate their children as they see fit, and use the resource wealth within their regional borders to achieve development goals that they set for themselves, it is likely Indonesia will survive, although as a far more decentralized state than the one Soeharto left for his successors," she said.