Are we on the road to recovery?
Are we on the road to recovery?
By Sri Pamoedjo Rahardjo
JAKARTA (JP): The drastic downturn in the Indonesian economy
has confounded many experts. Conflicting ideas on how to overcome
the problem have in fact confused the public. While the economy
has shown favorable net exports in its balance of payments, the
country is still not able to attract foreign investors. Most of
them opt to stay on the sidelines awaiting clearer signals about
the administration's economic policies.
Despite the government's commitment to carrying out market-
oriented reforms, the business community has not been impressed
with its policies. Public investments alone cannot be relied upon
to stimulate recovery. Although government spending has
increased, this is due to rupiah depreciation and higher interest
rates.
As the government can only keep its cash operations within
prudent levels, this situation is not likely to encourage private
sector investment due to a lack of business stimulus. Private
investment, therefore, is still expected to remain sluggish in
the next months. At the same time, unfortunately, assaults on
human rights have surfaced precipitating a round of the politics
of hate. Blaming, insulting, and slandering have made the social
conditions unfavorable for the business community to flourish.
If the economic crisis is to be contained and reversed, to
overcome further investment declines, it is imperative that the
elements of this crisis be transformed into manageable
challenges. History has taught us that success in the development
of most countries has often been preceded by a crisis. During the
crisis, innovative changes emerge to a united rallying point and
healthy competition subsequently arises. The pressures emanating
from the crisis should be just right to sustain, not destroy, the
existing social structures. If the pressures are too immense, it
can destroy the human capacity to adapt to desired changes. If
the crisis is too austere, it can cause a break-up or
disintegration of the existing social systems.
From selected countries that have overcome extreme economic
difficulties, a common denominator becomes obvious, and that is
the stability of the country's social structures.
To illustrate, Japan, a country with limited resources,
experienced total destruction after World War II. Judging from
the physical devastation at that time, it seemed an impossibility
that Japan would recover in short period of time. Fortunately,
the damage did not include the destruction of the Japanese social
system. The role of the Emperor as the center of national pride
and unity was intact. Had the Emperor been included as a war
criminal, Japan may not have been able to raise itself and
develop to become the leading world economy today, and a strong
ally to the western world.
In fact, Japan was successful in achieving an economic
recovery that is quite remarkable. In each cycle of development,
a country faces new internal and external challenges, as well as
internal disagreements which are essential to carrying out
innovative approaches to reach higher levels of development.
Another illustration is Singapore. When the country decided to
separate from the Federation of Malaysia, there was great doubt
that it would survive. The country decided to maintain the
British system and stability was attained. With strong discipline
to maintain stability, the environment provided a conducive and
fertile structure to develop its economic system. Had the
founding fathers of Singapore chosen another system, the outcome
may have been different.
As the economy takes-off, it adjusts to meet new challenges
from within and outside, to reach a balance. With the stability
of its social system maintained, the Singaporeans, transformed
these challenges into business opportunities.
Furthermore, the state of Israel became a strong country
militarily and economically, despite its neighbors' hostile
attitude toward the state. Internal stability was maintained with
a solid philosophy of Zionism at its foundation. On the contrary,
the state of Yugoslavia has become a memory on the world map. The
disintegration of Yugoslavia was due to the internal and external
pressures which proved too great for its people to overcome. The
crisis destroyed the spirit of unity and ruined Yugoslavia's
social system.
The lessons learnt from these examples teach us that despite
varying political systems, countries can become strong and
prosperous when the basic unifying threads are maintained. The
desired changes should not be so disruptive as to annihilate the
existing culture.
How has the crisis effected Indonesia?
In its early stages, most Indonesians believed that the crisis
would be temporary in nature. The government upheld the notion
that an economic breakdown was not imminent because Indonesia's
economic fundamentals were better than those of Thailand and
Mexico. The assumptions at that time were true because the
government's borrowings were still manageable, and the country's
foreign reserves were at their healthiest. Then the crisis
worsened and the local currency lost its value. The government
was, in fact, caught by surprise with the unbelievably large
private sector debts which had only accumulated in the last five
years!
Attempts to stabilize the monetary situation have failed,
because any attempt to correct the economy was viewed with
suspicion by various-political groups which mushroomed in the
country. Accommodative policies wavered back and forth and as a
result, the country's economic condition rapidly deteriorated.
Functionally, Indonesia has become bankrupt and hordes of its
people are mired in poverty. At this point, the social, political
and economic parameters have significantly changed. Even if the
IMF rescue package is to be implemented now, it is like pouring a
bucket of water on a forest fire.
Following the political upheaval which erupted in May this
year, the image of Indonesia was tarnished irrevocably. The
crisis has demoralized every level of Indonesian society. The
government lost its magic touch and the curses locked in
Pandora's Box exacted their toll. People have varying
interpretations of reforms for democracy. Democracy is touted as
complete unbridled freedom. Reform becomes synonymous with change
at will.
Disagreements about unconditional change have been ridiculed
as anti-reform. The value of respect and loyalty have disappeared
from our cultural mores. Everybody feels betrayed. Mass-protests
have become our daily fare. Increased unrest indicates that both
government administrators and government critics have forgotten
the elements that comprise a society. By a simple definition,
society is a collection of individuals who feel bound together,
who abide by special patterns of behavior for the group to
interact over time. Interaction can happen if each member in the
society understands the structure and each role in that
particular structure.
The binding element of the New Order became unbalanced. The
society witnessed a withering of national integrity among its
leaders because the national climate was dominated by collusion,
corruption, and nepotism. Subsequently, we witnessed the
disintegration of national unity when the staunch supporters of
the New Order began to withdraw their loyalty to the leader. The
society bred die-hard supporters of the New Order who now take an
opportunistic stand by slandering the regime. A new cop out term
KKN, which collectively stands for collusion, corruption, and
nepotism reared self-righteous groups both within and outside the
government system that used the term to castigate any and all
that ails society.
While the demand for transparency and freedom from corruption,
collusion and nepotism (KKN) functions as a social control for
public and business managers, the term has been indiscriminately
used to slander every area of the leadership. It has made life
more difficult and more chaotic for the grassroots population.
The new cop out term overshadows the old term of kontra
revolusi or counter revolution (Sukarno era) and G-30S/PKI or the
communist coup d'etat on Sept. 30, 1965 (Soeharto era). Even the
$7.9 billion pledge from donors in the Consultative Group on
Indonesia (CGI) to help speed up Indonesia's economy and put it
back on track, will be useless because of uncertainties in the
social and political climate.
The polemics have created new abuses, all in the name of
reform and essentially threaten the threads that bind people
together as a nation. Rightly or wrongly, the country's social
life has been preoccupied by anger towards perceived wrongs and
injustices. The country's economic life has been dominated by
greed.
The country's political arena has been characterized by
personal ambitions and vengeance. The successes of Indonesia in
the past, as a stable country with hard working people and an
example for the Third World, is gone. The last 30 years showed
Indonesians as a united people. Unless the politics of slander
and hatred stops, the country's disunity and instability will
continue. The business community will not be willing to reinvest
and the flight of capital will continue, until there is no more.
Disunity and negative images of our country have been followed
by our neighbors with grave concern. The Filipinos blame us for
creating urban traffic snarls in Manila because their Indonesian
build-to-operate (BOT) elevated toll highway project is delayed.
The Taiwanese condemn us for being too ethnocentric and harming
our own Indonesians of Chinese descent. They have transferred
their investments to other countries. The UN continues not to
recognize East Timor as an integral part of the country. Before
approving additional foreign assistance, the Americans are asking
whether U.S. military assistance was used for recent alleged
tortures and kidnappings. Other comments are too humbling to
refute. The reputation of Indonesians as a kind, friendly and
peaceful people has been swept away by winds of change sweeping
the country.
In conclusion, disagreements and opposition are needed to
generate innovative ideas. If the opposition becomes an end unto
itself, the pressure for change becomes a tool of destruction to
a societal structure which forms the foundation of a nation.
Development strategies will be waylaid if socially divisive
actions prevail. In this case, no amount of financial assistance
will lead this country on its road to recovery. The price to the
nation is painful and expensive. Are all Indonesians of varying
sociopolitical and ethnic backgrounds, now on divergent paths,
willing to travel together for societal and economic recovery?
The writer is a social and economic observer and former
regional development bank officer.
Window: History has taught us that success in the development
of most countries has often been preceded by a crisis. During the
crisis, innovative changes emerge to a united rallying point and
healthy competition subsequently arises.