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.