Place more emphasis on human security

Satish Mishra, Head, United Nations Support Facility for Indonesian Recovery (UNSFIR), Jakarta, satish.mishra@undp.org

The calamity of Bali has certainly had its share of publicity. Police investigation was conducted in the full lime light of international publicity. Foreign equipment and foreign personnel poured into troubled Denpasar. The police chief and the chief suspect became the butt of intense analysis and equally intense recrimination. To some, the bombing of defenseless Bali seemed to signal the very loss of the Indonesian soul.

To those with less philosophical bent of mind, the impact of Oct. 12 could be measured in lost future investment. They could also be estimated in falling incomes from tourism and trade. The not unexpected result was acute attention to economic variables. Movements in the Jakarta Stock Index were studied with precision. The exchange rate was kept under full alert. The IMF came to town. Policy makers put their heads together. The budget was revised. The projected deficit was raised by a full half percent of national income. Inflation projections were revised marginally upwards. Growth estimates moved marginally down.

Very soon, Bali, despite its terrible loss of life, began to appear like one of so many such events that could happen anywhere, to any one, at any time. Its economic effects, it was increasingly argued, had been short lived. Government economic policy had remained on track. Economic reform had begun to proceed along its normal course. The financial markets, used to such events in the even developed countries such as Britain, France, Spain and now the U.S., were already beginning to discount Bali. In time, we would all grow used to it. The relative stability of the rupiah was evidence of that.

In such circumstances, patriotic Indonesians and friendly foreigners could do no better than to vacation in Bali. They could bring families and friends. The government had taken special steps to ensure that Bali would be well protected. There was now one policeman to 350 people in Bali. This was a sharp improvement from the pre-October ratio of over 800.

This is all very excellent. Indeed, it is the perfect short- term response to an unexpected shock. Douse the embers, put out the fire. Stay in control. Wait for the storm to blow over. Tell yourself that it will not happen again.

Good crisis management tactics often make for bad policy. At times, they also make for bad politics. This is perhaps the most important lesson to emerge from the last five years of the Indonesian political, economic and social transformation.

It is for that reason the real impact of Bali cannot be measured by the speed with which tourists return to its hotels and beaches. That is certainly normalization of a kind. But it is not the central message from October 12. The issue at stake is not so much the normalization of Bali but recalibrating the engines of reform in Indonesia. It has been said that Bali constitutes a wake up call for Indonesia. Business as usual is a convincing immediate response. It is a show of national determination. It is a good signal to the outside world. It is a demonstration of the national spirit. Taken too far it is to ignore the lessons of systemic transitions the world over.

The central lesson is that political legitimacy, on which the non-violent resolution of social conflict so crucially depends, cannot be bought by economic growth alone. Economic growth eases many strains of an emerging democracy. It does not ipso facto solve problems related to rights and social justice. Nor does it address other issues relating to democratic governance. Of central concern is the role of the State in democratic polities, the domain of public goods that it is expected to provide and the process through which these are allocated. The last of these involves creating institutional structures such as to give an effective voice to the citizen at large in public policy making.

The implication is obvious though often ignored. There are a number of equally good claimants for the public purse: social welfare provision, national security and order, public administration, a range of financial and regulatory services supplied through the state. To treat these claims as residual claims after the demands of public bail out of banks and corporations is to miss the point about system wide changes already underway in Indonesia. Political transformation is an integral part of the equation. It is not some exogenous variable which can be treated as part of the backcloth against which the drama of economic recovery is to be played out.

If this view is correct the overall reform program should have paid as much attention to security and social justice issues as it did to economic and related institutional reforms. Bringing military and police funding on budget should have been a central element of such a program. This is important in order to ensure civilian control of the military. It is also integral to the promotion of a professional security apparatus. Money could have been traded for reform and efficiency. But to put debt resolution and financial reform before military finance was to fall into the usual trap of treating the Indonesian transition as an economic crisis. Economists must take their share of the blame.

What is really the justification for leaving 70 percent of the military and police funds off-budget, a euphemism for largely unregulated military businesses? Equally, what is the logic of a defense budget for Indonesia which is about the same size as that of Singapore? One can grant that not all of these businesses could have been brought on budget in a single year. Why could it not have brought on within a period of four to five years? Why was there no real plan to do just that at the start of the reform program? Such a plan would have sent an important message. Human security is an essential building block for democratic polities governed by the rule of law. It is not a luxury for rich societies once they cross a particular income threshold.

This is not all. Bali is also telling us something more. Investment decisions in times of transition are as much determined by considerations of security, civil disorder and political instability as they are by interest rates, inflation targets and independent central banks. Tipping the balance of public expenditure to economic institutions brings about neither sustained growth nor stable democratic institutions. Ironically, it might also fail to advance the economic reform agenda. A deeply divided society characterized by increasing polarization of politics does not make for an acceleration of structural economic reforms.

It would appear that the investor is a smart animal after all. He can see what everyone in the street can see. That it is time to rethink public policy. It is time to give higher weight to political reform, social justice and human security than has been the case so far. It is time to get over the bank fetish.

The opinions expressed in this article are strictly personal.