Challenges to national unity

Challenges to national unity

The following article is based on a paper presented by Juwono
Sudarsono, Vice Governor of the National Resilience Institute
Defense College, at the Indonesian Executive Circle on March 29,
1995. This is the first of two articles.

JAKARTA (JP): The challenges facing our national leaders in
maintaining Indonesia's unity during the next 10-15 years will be
in factoring an archipelagic outlook and national resilience in a
comprehensive and balanced manner. The judicious implementation
of these collective performances will be compelling as pressures
build up for change and reform, arising from the very success of
widespread social and economic transformation across the country
over the past 25 years.

Externally, the advantages that Indonesia enjoyed throughout
1969-1994, its strategic importance in maritime Southeast Asia,
its vast pool of natural resources and its striking potential as
a vigorous market, have declined in relative terms as the major
economies of North America, Europe and Japan look to other big
emerging markets. Competition for investments, trade
opportunities, market access and development finance come from
Mexico, Argentina, Brazil, China, India, Vietnam.

Despite Indonesia's past success at controlling population
growth at an annual average of 1.8 percent (an increase of three
million Indonesians every year) a keen sense of urgency must be
maintained, especially in Java and Bali, where 65 percent of the
population resides. Recent estimates put the breakdown of
population distribution at: Sumatra 41 million, Java 110 million,
Kalimantan 11 million, Sulawesi 13 million, Nusa Tenggara 11.5
million, Maluku 11.9 million and Irian Jaya 1.6 million.

Nation-wide, total fertility has declined by 40 percent since
family planning was instituted 25 years ago, although growth
rates in Riau, Kalimantan, Southeast Sulawesi and Irian Jaya
remain at above three percent per annum.

The government estimates that by the year 2020 the growth rate
will plateau at 250 million Indonesians, at an average of 3.1 for
the desired family size (compared to 6.6 twenty years ago); even
that seems overly optimistic.

The tension levels which periodically occur in Java,
particularly over land ownership and never-ending labor disputes,
are clear manifestations of enduring population pressures. For
the rest of the 1990s, roughly 85 million Indonesians will be in
the work force, of whom 15 percent do not have any education and
about 50 percent achieve primarily school level only. Over one-
third comprise the socially volatile 15-29 age group. By 2005,
more than 35 percent of Indonesia's population will congregate in
industrial-urban centers.

Our greatest challenge in the economic field will be to
maintain real growth above the rate of population increase and to
control inflation at a manageable level. In the past, growth
relied heavily on the oil and gas sectors, which contributed more
than 70 percent of government revenue during the crucial 1966-75
period of consolidation. Over the past decade, impressive annual
growth rates of 12 percent in the export of manufactured goods
have been sustained, surpassing oil-gas earnings since 1986.

Nevertheless, if we are to achieve measurable improvement in
our material well-being, Indonesia will have to uphold an annual
growth rate of at least 5.6 percent well beyond the year 2000
when the Gross Domestic Product per capita is expected to reach
US$1000. By 2010, the Indonesian economy is expected to comprise
45 percent in industry and manufacturing, 24 percent in services
and 12 percent in agriculture.

Until the 1980s, the problem of balanced growth had been
defined in the dichotomy between Java and the outer islands. The
dangers of economic disintegration now and in the future emanate
from the wide disparity in the scope of activity and the
strikingly different growth rates between the western and the
eastern provinces.

These disparities are made more acute by the pattern of
Indonesia's international exports and flow of investments.

Japan and the Asian Newly Industrialized Economies (NIEs)
constitute 40-60 percent of export destinations, the combined
U.S.-Europe about 20 percent and intra-ASEAN another 15 percent.
More than 70 percent of these exports originate from Sumatra,
Java and Kalimantan. Sixty percent of Japanese and Asian NIEs
investments are concentrated in Java, Sumatra and Kalimantan,
where the infrastructure is relatively advanced.

The challenge to maintain economic resilience will be to
provide impetus so that the industrial growth poles facilitate
higher levels of integration with the eastern half of the
archipelago. The race to match rhetoric with performance will be
demanding.

Maintaining the inter-provincial balance constitutes another
imperative. The more prosperous areas are in the west-central
regions of the country: Greater Jakarta (Jabotabek), Java, East
and Central Kalimantan, Aceh, Riau and South Sumatra. Aceh, Riau
and East Kalimantan are richest in oil and gas, currently
contributing 54 percent of the revenue, with substantial non-oil
export products. Because of proximity to consumer markets and
superior infrastructure, West and East Java showed a 40 percent
increase of value-added manufacturing exports in the 1986-1992
period. Prime cities such as Medan, Pekanbaru, Palembang,
Pontianak, Banjarmasin, Balikpapan and Samarinda will have to
function more effectively as crucial points in a network of
exchanges of goods, services as well as managerial personnel.

Clearly the links between the growth poles in the west,
Singapore-Johore-Riau, the Indonesia-Malaysia-Thailand growth
triangle, and the East ASEAN Growth Area must show more tangible
progress in the critical decade ahead.

Some estimates project, that by 2005, Indonesia will cease to
be a net energy exporter. Though coal and gas will continue to be
important sources of revenue, there will be even more urgent
needs for tighter management, improved efficiency and expanded
export diversification in the non-oil sectors. The ASEAN Free
Trade Area 2003, Asia Pacific Economic Cooperation 2020 and World
Trade Organization rules will be never ending issues of hard
bargaining and tough negotiation.

Internally, Indonesia's leaders will have to undertake even
more serious steps to overcome imbalances between powerful
groupings of the 22 conglomerates and the vast majority who
remain below the poverty line. A major transformation of the
credit structure must be instituted through concerted government
political will and action.

Small scale and medium enterprises -- largely indigenous, and
often imbued with strong Islamic values -- must be nurtured to
develop skills and build effective economic institutions. Unless
tackled with seriousness and consistency the economic disparities
between the rich and the poor will continue to be marked by
periodic social dissatisfaction and political agitation,
magnified by dangerous cleavages along racial, ethnic and
religious lines.

Politically, the rise of the Indonesian middle-class,
currently estimated at 14 million, has led to incessant demands
for broader political participation not only in the urban centers
of Java, Sumatra, Kalimantan and Sulawesi, but also in the three
outlying and politically sensitive areas of Aceh, Irian Jaya and
East Timor.

Public administration, specifically local government, will
have to bear heavier burdens of delivering the basics such as
food, public order and low-cost public housing. Without
discernible progress in the provision of these essentials of
"social overhead", there are dangers that overzealousness in the
inculcation of Pancasila as the national ideology will breed
apathy, cynicism and even outright rejection, especially among
the young and the unemployed.