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