Indonesia, the WTO and globalization

By Huala Adolf

JAKARTA (JP): Monicagate aside, one tough issue now drawing the attention of the international community is the economic crisis now gripping most East Asian countries.

The economic crisis has raised a number of issues and is leading toward a rethinking of the impact of economic globalization as promoted first by the GATT and now by the WTO (World Trade Organization).

After bearing witness to the crisis, we should now ask if globalization is still relevant and if it is worth maintaining? Conversely, since membership of the WTO and other similar organizations has proved to be an ineffective means of fighting the crisis, is it really worthwhile for countries like Indonesia to maintain a presence in these "clubs"?

The economic crisis, which first hit Thailand then spread to Indonesia, South Korea and other East Asian countries, has also affected, to a certain degree, the world's strongest economy, the United States.

Turbulence in Latin America -- particularly Brazil and Argentina -- also contributes to the bleak economic picture and again gives rise to the question as to what degree of responsibility must be borne by globalization in leading to this state of affairs.

International institutions such as the World Bank and particularly the IMF have been blamed for interfering too deeply in the domestic economic affairs of countries to which they issue loans. Critics have said that the IMF imposes overly stringent conditions upon recipient countries in exchange for financial aid.

Indonesia actually entered into the "prestigious economic club" in 1950, when it was officially accepted as a member of the GATT under the sponsorship of the Netherlands. When GATT later became the WTO, Indonesia was swift to ratify the necessary domestic legislation, which it passed in 1994.

There was a strong debate in the House of Representative concerning ratification of the WTO treaty. Those against believed that by ratifying the treaty, Indonesia was subscribing to economic liberalization in a form tantamount to an encroachment on Indonesian sovereignty. It was also said to be out of tune with Article 33 of 1945 Constitution, which stipulates that the Indonesian economy must be administered cooperatively and that important branches of production must be controlled by the State. Despite the debate, this strong resistance to ratification was quelled not by a reasonable and acceptable case presented by the state executive power (then president Soeharto), but because of the executive's powerful position. Throughout the New Order administration, executive branch decisions were tantamount to law. Nobody could challenge its decisions or policies, even the constitutional representatives of the Indonesian people.

Although there was no clear reason for Indonesia to enter the GATT or the WTO, it does not follow that the country should now resign its membership, in fact there is no good reason for Indonesia to leave the club. Until recently no country in the world, except perhaps North Korea, has attempted to distance itself from the international economic community. Most developing countries, especially those in Latin America, see membership of these organizations as the best way to come to terms with globalization.

Furthermore, globalization is irresistible and since many influential trading nations are members of the club, other countries have no choice but to play the rules of the game. All nations, and developing countries in particular must, like it or not, learn to accept this 'sour' reality.

States that have ratified the WTO treaty have an international legal obligation to abide by their decision. The act of ratification binds a state to fully implementing the provisions of the treaty. It does not mean, of course, that a country is unable to withdraw its membership, but 6 months notice must first be given if that is a state's intention.

To withdraw from the club is easy. But to return can prove difficult. For example, China was once a signatory to the GATT. However, in 1970 she decided withdrew from the agreement and is now struggling hard to be accepted into the WTO, as yet without success due to U.S. objections. The big Uncle contends that China must first apply the rules and standards of international trade in its own country before rejoining the club.

The main cause of our economic woes is not globalization. Our troubles stem from economic mismanagement in most East Asian countries. A weak financial system and widespread corruption, collusion and nepotism are believed to have contributed to the domino-like fall of East Asian countries in the face of the unfolding monetary crisis. A German research institute once suggested that Indonesia was among the world's most corrupt countries. Foreign investors wanting to do business here must, as a matter of routine, bribe top officials to obtain permits and get their investment applications processed.

The point that I want to raise here is that there is no room for Indonesia to blame the present economic woes on globalization and to withdraw from the world economy as a result. It is evident that the present economic woes have had a severe impact on most Indonesian people. A recent report revealed that more than 50 percent of the country's 200 million people are now living in poverty. Millions of school children have been forced to drop out of school and thousands of babies are suffering or have died from malnutrition.

The picture is possibly the darkest yet painted of the country since independence 53 years ago. But every cloud has a silver lining and I believe that the current economic difficulties will become a turning point leading to a New Indonesia and that from here we will go on to face a global future in a stronger position than ever before. But this will only happen if the present government is truly committed to addressing the threefold problem of corruption, collusion and nepotism.

The writer is a lecturer in law at Pajajaran University, Bandung.