Lessons to be learned from Japan's reform measures

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.