Megawati's promise of jobs

Megawati's promise of jobs

President Megawati Soekarnoputri's adoption of job creation as
a key policy of her economic platform ahead of the July 5
election is unconvincing, as it is precisely in this area that,
as perceived by the public, her government has failed miserably.

If reelected, Megawati promises to create almost 13 million
jobs in the next five years by accelerating annual economic
growth to an average of 6.8 percent, from about 4 percent over
the past three years.

Jobs are, indeed, desperately sought by the some 10.5 million
unemployed and 30 million underemployed people across the
country. For these people living in poverty, jobs would bring
options, second chances and solutions.

The experiences of countries that have succeeded in reducing
poverty have shown that the majority of people who escape it do
so by taking up new employment. Certainly, not just any job
offers a way out of poverty. If Megawati is simply promising to
generate jobs, the government's employment of every job seeker
would do the trick, as has been tried by some communist regimes.

What Megawati has promised is most likely productive jobs, but
this is exactly why her promise is a tall order. The achievement
of her government is limited to political and macroeconomic
stability, of which it is proud. This does not mean that
macroeconomic stability is not important; on the contrary, it is
unquestionably vital because without a stable macroeconomic
environment, no other progress will be made in the economy.

However, as the huge pool of unemployed, underemployed and the
poor testify, macroeconomic stability is not enough. Various
economic sectors should also be stimulated as jobs are created by
businesses -- whether small, medium or large -- and not by the
government. The main role of the government in this context is to
act as a facilitator, creating an environment conducive to
business activities.

Job creation, therefore, requires a vibrant private sector
that makes investments, improves productivity, promotes growth
and increases opportunities for the poor.

Megawati, in order to deliver on her promise, should
significantly improve the investment -- that is, business --
climate because, according to the estimate in her economic
platform, investment must be increased from its current annual
rate of around 20 percent of the gross domestic product to at
least 27.1 percent. Since the government's financial capacity
will remain severely limited by its domestic and foreign debt
burdens at least until 2010, it is the private sector that will
need to be responsible for the bulk of investment.

However, private investors are willing to stake their capital
only if the overall investment climate allows for a calculable
business risk. This, in turn, will be dependent on good
governance in the public sector, particularly legal certainty,
reliable policies and a strong and efficient regulatory
framework.

In other words, the quality of business regulations and the
institutions that enforce them are, collectively, the determinant
of a vibrant business climate.

A recent World Bank survey shows that the business regulatory
system in Indonesia is among the most cumbersome, requiring a
process of more than six months to obtain a business license,
which entails numerous steps starting with registration at the
Ministry of Justice and Human Rights, obtaining a corporate tax
identification number and many other requirements.

Cumbersome business regulations, also, are inimical to small
businesses which, in most countries, generate the greatest number
of jobs. Small-scale entrepreneurs simply do not have the
resources and cannot afford the arduous regulatory procedures,
which, in Indonesia, also means additional expenditure to line
officials' pockets.

The national reform agenda, launched last September in the
White Paper on Reform, covers almost all measures needed to
revive the investment sector, including tax and customs reform
and improving the Bankruptcy Law and labor regulations.

However, progress in many areas has been much slower than
expected. Worse still, the government has often backtracked on
its own reform measures.

If Megawati is really serious about poverty reduction and the
mass creation of jobs, she and her government should go all out
to improve the investment climate by minimizing business risk to
an acceptable level through the implementation of strict reform
measures.

___________