Lessons to be learned from Japan's reform measures

By Paridah A. Samad

JAKARTA (JP): Indonesia's reform measures are genuinely needed to restore confidence in its troubled economy during the current monetary crisis, the worst in the 30 years of the country's period of economic growth.

The US$23 billion aid package provided by the International Monetary Fund and its allies -- the World Bank and the Asian Development Bank -- to Indonesia is to help the country implement its reform measures to face the economic and monetary crisis.

In exchange for the package, Indonesia has undertaken its first measure by revoking several state monopolies and shutting down 16 financially troubled private banks.

In justifying the benefits of such measures and in hailing the international rescue package for Indonesia, many analysts demand radical bureaucratic reform to ensure proper use of the funds.

However, no specific ways to implement such reform was mentioned. In spite of this, they believe that the main agenda for reform should focus on fighting widespread monopolistic and corrupt practices, bridging the widening socio-economic gap and reducing nepotism.

For them, although the foreign aid package would support the troubled national economy, there is a need for the aid to be backed by a political will to establish a clean government by putting an end to officials' extravagant lifestyles.

The credibility of the government would be questioned if government officials appear to be living in luxury in spite of the economic crisis, or seen to continuously spend the much constrained state budget for ceremonial purposes.

If this continuing phenomenon prevails, social unrest seems unavoidable in the near future. Social unrest would trigger unemployment and insecurity among employees. The closure of the 16 banks with some 250 branches across the country has made thousands of people unemployed. The number of jobless will also increase with the return of over 20,000 "problematic" Indonesian workers from Saudi Arabia.

Recently there were proposals to the government by 50 private companies throughout the country to dismiss 10,000 of their workers.

In these circumstances, resorting to a security approach to solve social problems would not help and could even worsen the situation. If the nonconventional security approach of bureaucratic reform could offer hope for restoring a healthy economy, it justifies the need for the Indonesian government to overhaul its bureaucratic system which is a prerequisite to the success of its economic reform.

The problem is that neither analysts nor politicians have come up with a comprehensive strategy for dealing with such reforms. With the absence of a model for reform, perhaps Indonesia could use Japan's administrative reform as a guideline in formulating a cleaner government in order to create healthy economic growth.

The agenda for Japan's administrative reform has focussed on the bureaucracy.

Japan's reform has been regarded as important after the emergence of a towering budget deficit surpassing 400 trillion yen (US$3.17 trillion) -- which is tantamount to a declaration that the authority of the bureaucracy in Japan could no longer be sustained. For the Japanese, this situation represents that it is worse off than any other developed country.

The Japanese are increasingly aware that in terms of cost and performance, the current administrative system poses a direct threat to the future of the country. The bureaucrats are becoming the butt of vitriolic criticism over their corrupt practices.

Japanese indignation over a succession of corruption cases involving highly-placed government officials has created a great desire for reform. This has put the administrative reform (Gyokaku) at the top of Prime Minister Ryutaro Hashimoto's political agenda and it is now becoming the national catchphrase. The administrative reform has been construed as being symbolic of the realization of the need for reform of the country's entire system.

To make Japan's administrative reform really work, the government has to subject all administrative outlays and public investments to rigorous cost-and-benefit analyses and make it obligatory for each government agency to publicly report the result. Any government agency that spends public money owes it to the nation to prove that the money spent would generate matching social benefits.

The goal of the reform program is to create a simple and efficient public administration that is able to respond to the new age while being trusted by the nation's citizens. This is important in order to prevent Japan's current administrative system from posing a threat to the future of the country as a result of the significance of its rampant corrupt practices.

The problem in Japan is that the country does not have a strong leadership. Without strong leadership, the reform process could easily founder in the sea of committees, and, in the best of Japanese political traditions, a series of compromises that produce almost nothing.

Indonesia, however, has strong leadership under President Soeharto, who would provide the backing force to the success of the bureaucratic reform. Even though a complete overhaul of the bureaucratic system has been identified as the main thrust to solve Indonesia's current economic predicament, unfortunately, very few concrete policies are forthcoming on just how this reform should proceed.

The economic behavior of Indonesia and Japan are quite different, but the desire for both countries to undergo bureaucratic reform is similar, with similar reasons.

The writer is a senior lecturer at the MARA Institute of Technology (ITM) in Shah Alam, Malaysia, and previously a visiting research fellow at the Japan Institute of International Affairs (JIIA), Tokyo.