Economists' gathering

Economists' gathering

The 13th Congress of the Indonesian Economists Association,
which begins this afternoon at the Tiara Convention Center in
Medan, North Sumatra, has chosen "Managed market economy in the
run-up to the 21st century" as the central topic for its three
days of discussions. The concept of managed market forces --
which market players simply and, sometimes, disdainfully, call
government intervention -- has actually been inherent in
Indonesia's economic system. The concept was one of the general
principles of the economic democracy system, which was proposed
to the government in September, 1990, by the association under
the leadership of the then minister of finance, J.B. Sumarlin.

The question is why the association now considers it so
imperative to pick the managed market economy as the main agenda
for discussions at its congress.

The answer may lie in the increasing grievances voiced by
businesspeople over the excesses of government market
intervention. It is not the concept itself but rather the quality
and extent of government market intervention and the rules and
transparency by which the market forces are managed, which have
come under question by the private sector.

The congress is the right forum to discuss the issue. Because
the association groups technocrats, academicians, enterprising
economists and analysts from throughout the country, the
gathering will be able to conduct both theoretical and empirical
analyses of the problems and excesses within the mechanism of
managed market economy.

It is a painful surprise to observe that after more than 20
massive packages of deregulation and bureaucratic reform measures
launched since 1985, the business community, instead of being
stimulated by the unleashing of the market forces, has been
complaining about monopolistic, cartel-like practices and various
other forms of restrictive business practices. These problems
have assumed such a magnitude that they are often cited by
businesspeople as the main cause of the declining growth of
exports.

It is quite strategic that the 13th congress is designed to
analyze the issue from various economic and noneconomic aspects,
notably the institutional capability and the legal framework. As
proven by the experiences of other governments which have
successfully implemented interventionist policies, an appropriate
legal framework and institutional capability are among the basic
prerequisites for the effective operations of a managed market
economy. That means that market intervention must be grounded in
a predictable process or be based on a set of clear rules.

Case studies on countries which have successfully pursued the
concept of managed market forces point to a common thread. Market
intervention requires policy neutrality on the part of the
government and political and procedural predictability on the
basis of legal and administrative autonomy from interest groups.
Put another way, market interventions will tend to cause
distortions, like the ones now encountered by businesspeople in
Indonesia, if the interventions are not adequately based on
neutrality, predictability and accountability in the public
sector.

Predictability refers to clear rules and their strong, fair,
consistent enforcement. Hence, predictability should be based on
institutions, rather than on stability grounded in a leader or
persons. Devoid of the factors described above, market
interventions will serve mostly to strengthen the discretionary
power of government officials. Needless to say that such powers
are susceptible to different interpretations and that the
objectives of market interventions can be vitiated. But the
market players do not have procedurally simple and quick recourse
for redress of unfair actions or incompetence of the executive
authority.

As the association convenes a congress only once every three
years, the 13th congress is quite opportune for preparing a
conceptual clarity on the managed market economy to be submitted
to the government or the People's Consultative Congress, which
will meet in March, 1998, to formulate the broad outlines of
state policies for the 1998-2003 period and to elect a new
president.