New paradigm needed to face globalization: Economists
JAKARTA (JP): Several noted economists have suggested that Indonesia applies a new paradigm to its economic development to anticipate changes resulting from globalization.
"We need a new paradigm to face a number of new trends caused by continuing globalization," economist Mari Pangestu of the Centre for Strategic and International Studies (CSIS) said yesterday.
Mari and economists Djisman S. Simandjuntak, Faisal H. Basri, Miranda Gultom Siregar, Sjahrir, Moh. Arsjad Anwar and Bungaran Saragih, were speaking at a seminar on "Seeking A New Paradigm in Indonesian Economic Development", which was organized by CSIS.
The trends, according to Mari, include increasing trade protectionism in the developed countries.
"The domestic pressures for trade protectionism will increase in industrialized countries due to the increasingly tougher competition in the world market," she noted.
While developed countries hope to market more products in developing countries --particularly those in the highly dynamic Asia Pacific region, they at the same time see the emerging economies as their main competitors to their domestic markets, Mari said.
She said in the future investments will flow only to the countries with sound and consistent macroeconomic policies.
On fiscal policy, she said the Indonesian government should not raise taxes to finance its comprehensive social security system, as their counterparts in many other developed countries have.
Miranda Gultom, an economist of the Jakarta School of Economics at the University of Indonesia noted that Indonesia will face a serious problem in its business institutions, particularly in the banking sector, when tackling global competition.
She cited particular weaknesses of the banking sector in human resources, technology, payment systems, and policy inconsistency on the part of the Indonesian government.
Djisman Simandjuntak, the director of the Prasetia Mulya School of Management, criticized Indonesian businessmen who have been focusing on high growth through short-term strategies.
He saw corporate investment in human resource development as extremely inadequate.
Agro-business
Bungaran Saragih, an expert at the Bogor Agricultural Institute, suggested that the government refocus attention to the agricultural sector, which still employs 50 percent of Indonesia's workforce.
"If the priority of our development process is to alleviate poverty without damaging the environment, we should develop more of our agro-business resources, " Bungaran said.
However, Emil Salim, a former minister for population and environment, also saw the need for a new paradigm of economic development but suggested that it remain based on market mechanisms.
Emil added that the government should apply more monetary measures, rather than fiscal ones, to check inflation and to allow for the healthy development of the private sector.
On top of that, the government should further improve the climate for enhancing the competitiveness of the business sector through the dismantling of price distortions, managed trading, vertical and horizontal integrations and monopolistic practices.
He suggested that the government reduce its intervention in businesses and commit itself to maintaining consistency in its macroeconomic policy.
But Faisal Basri of the University of Indonesia argued that Indonesia does not need a new paradigm. "We should instead go back to basics," he said. (rid13)