Crisis calls for govt neutrality

Crisis calls for govt neutrality

By Hendrajit

JAKARTA (JP): The recent liquidation of 16 troubled banks,
given the close link between political power and business
practices, was indeed the first test of the government's
political will to deal with the business community.

It is necessary for the public to have a clear signal that
those who have enjoyed privileged access to the nation's
resources are willing to share the pain with tens of millions of
ordinary Indonesians. These are the ordinary Indonesians who have
been hit by rising prices, unemployment and spiraling interest
rates on car and home loans. This means that the government
should be committed to scrapping politically connected
monopolies, rationalizing the country's shaky banking system,
reducing the subsidies of some sensitive commodities and cutting
import duties.

Indonesia's record of leaks and misuse of public funds via the
granting of licenses is well-known and has resulted in a high
cost economy and market monopolies or oligopolies. The
accumulation of capital in the hands of a small number of people
has become an extraordinary phenomenon in Indonesia as a result
of protection mechanisms and irregularities in the use of public
funds. Thus in the process of economic reform, the question of
public accountability is of paramount importance in terms of
policy legitimacy.

More importantly, the government must be transparent in its
use of the public's funds in order to earn trust. Therefore,
transparency and accountability in the management of public funds
and the budget are badly needed. But they are not easy tasks. In
an effort to improve banking performance, for instance, the
government needs to be more proactive to maintain tough measures
against banks which are not managed prudently.

Consequently, the government should be responsive, independent
and neutral from conflicting interests among the business
community. Accordingly, the issue is what mechanism includes
people and enables them to participate in the decision making,
where the interests of the people as a whole are well
represented? There must also be a mechanism to prevent the abuse
of power by the authorities and business elite who are very close
to government officials. If such abuse occurs, the authorities
and those who are close to power cannot be free from legal
account.

The problem that arises is that Indonesia's political
institutions are powerless, with no established rule of the game
to play by. The government's style of personalized rule, as
opposed to using institutional mechanism to exercise power, has
resulted in a political system which still has a patrimonial
character as it had in earlier periods as far back as the pre-
colonial Javanese kingdoms. The state stands above any contending
groups or vested interest. It must be recognized that there is no
institution whose function is to capture the government. The
institutions of power are there to ensure the smooth running of
the political system by integrating people into it.

In such a situation, economic and political reform cannot be
encouraged from below, but only from the center with the
development of a healthy and authoritative bureaucracy and the
implementation of laws in the wide sense. In consequence, the
commitment to economic and political reform must be started from
the top level of bureaucracy, not the lower level. This is partly
true because of Indonesia's tradition of patronage, where people
take examples from their leaders. If the leaders were corrupt,
its subordinates would be corrupt as well.

On the other hand, Indonesia today is facing new realities.
Pressure for change from society is increasing. Although rural
Indonesians are still bound in feudal-traditional ways of life,
there is growing chorus of urbanites who desire to see a less
authoritarian and paternalistic rule of law. According to
political observer Dr. Richard Robison from Australia, there are
internal forces at work as a result of Indonesia's economic
successes. Increasing industrialization and urbanization are
having an increased influence on the aspirations and political
consciousness of Indonesians. This newly affluent middle class
will look toward a more open and responsive political system in
the future. They are mostly dissatisfied with the excesses of
local government officials, the lack of public accountability,
and the relative gap in income between themselves and the
wealthier group. For the dissatisfied group, political change
offers the possibility of improving themselves.

Robison's way of analyzing is indeed insightful. By the way of
his observation, it is likely that in the future, power holders
outside the state will become more significant. In other words,
power will be moving to powerful social groups such as
independent professionals, conglomerate owners and young
reformist officers. In short, change is already occurring among
the educated middle class. More people are willing to confront
old taboos and rail against corruption, inefficiency, pollution,
low wages and even nepotistic monopolies in business practices.
Hence, those who hold power now must be wise enough to read the
development with clear glasses. This means that speaking about
development is really speaking about the adaptation of a whole
social system to new problems and challenges.

Economic development does not take place in a vacuum. It needs
a government that is strong enough and has a willingness to avoid
prestigious projects. It also means the willingness, the courage
and the capability to bring about the necessary administrative
reform. Economic development requires the capacity, the will and
the courage of the government to organize the whole nation for
that purpose, not only economically, but also politically. The
capacity of the government to maintain the momentum of economic
development will very much depend on its courage and ability to
absorb the political changes that follow in the wake of economic
development. Each phase of economic development will create its
own constituency, and these new constituencies will have to be
incorporated into the body politic of the nation. Clearly, it
needs a constant broadening of the power base on which the
government rests and a constant shifting of the constellation of
forces.

The writer is a researcher at the Institute for Strategic
Studies of Indonesia.