Basic-needs approach

Basic-needs approach

There were few new policies revealed during the two separate
question-and-answer sessions held with presidential candidates
Megawati Soekarnoputri and Susilo Bambang Yudhoyono and a panel
of four economists on Wednesday evening.

The quality of these forums was nevertheless improved as both
candidates took a basic-needs approach to the complex economic
problems the country faces, and the thought processes evident at
the meeting were down to earth. They aptly demonstrated a broad
comprehension of the basic economic issues and the enormous
challenges immediately confronting the incoming government.

Both candidates gave much attention to the problem of
unemployment, one of the main causes of poverty in the country,
candidly describing how jobs could generate wages, which in turn
would create purchasing power to fuel demand for goods and
services. This virtuous circle in turn would produce tax revenues
for the state to fund public services and maintain and build
infrastructure.

Jobs are indeed what are badly needed by the estimated 10
million unemployed and more than 30 million under-employed
people. Jobs are also the most important thing the 38 million
people currently living in absolute poverty need to escape their
deprivation. The experiences of countries that have succeeded in
reducing poverty show the majority of people who escape from
poverty do so by taking up new employment.

Both presidential aspirants demonstrated they realized
economic growth was the key to generating jobs and reducing
poverty, and that the economy would never expand without
investment. But the economic plan the candidates promoted during
the forums also showed their awareness of the severe restrictions
the state budget would face during the next five years due to the
huge domestic and foreign debt burdens and the ballooning cost of
fuel subsidies. Hence, they looked to the private sector to be
the main locomotive of growth.

The candidates reiterated the vital need to reinvigorate
domestic and foreign investment through the improvement of
governance, regulatory and legal frameworks, basic infrastructure
and labor regulations. They rightly concluded it is a vibrant
private, not public, sector that creates most jobs.

But private investors are only willing to infuse capital if
the investment atmosphere allows for a reasonable calculation of
business risks and if the competitiveness of the economy improves
significantly. But now, due to structural problems and poor basic
infrastructure, our economy is far more inefficient than our
neighboring countries. Consequently, the capital costs of
business ventures in Indonesia are much higher, and manufacturing
companies have to bear higher inventory costs due to uncertainty
in port-handling and an inefficient and corrupt customs service.

Both candidates promised, if necessary, to bite the bullet by
adjusting up domestic fuel prices closer to international levels
but they pledged to protect the poor from the brunt of these
increases by providing targeted subsidies on kerosene for
household use, the fuel most-widely used by low-income people.

The candidates are fully aware the huge fiscal burdens
resulting from the government's decision to maintain domestic
fuel price subsidies despite the rise in international oil prices
since late May could become a political landmine for the next
government.

Similar to the Aug. 2 meeting between both candidates and
national and foreign business leaders at the Jakarta Convention
Hall, Tuesday's forums were not aimed at the common people, who
make up the majority of voters.

It is yet comforting to note the significant improvement of
Megawati's communication skills, although Susilo in comparison
remained much more eloquent and articulate in elaborating his
points. This doesn't mean, however, that Susilo's economic plan
is better than Megawati's. In fact, Susilo's platform is similar
to most of the programs currently implemented by the Megawati
administration. The encouraging development though is the keener
attention paid by both candidates to the importance of good
communication.

Whoever takes over the government next month needs to be a
great communicator and deal-maker; so as to develop a political
consensus at the House of Representatives, and reach out to the
people to build public support for their program. The next
president should also possess a great sense of patience in
dealing with differences of opinion in the House and in the
nation as a whole, especially when addressing critics.

Put another way, although the new president needs to show
stronger leadership and be more decisive in policy making, he or
she should also be highly capable of selling economic reforms,
many of which will be painful. This requires well-developed
communication skills and an effective communication machine.

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