Reforms won't address regional gap
Reforms won't address regional gap
MANADO, N. Sulawesi (JP): Deregulation measures alone will not
effectively address the development disparity between Indonesia's
eastern and western regions, economists said here yesterday.
The eastern region simply does not have sufficient
preconditions for growth and is therefore not able to benefit
from the market mechanism, analysts gathered at the 8th meeting
of the Association of Indonesian Economists noted.
"Deregulation is necessary but not a sufficient condition to
stimulate economic development in the eastern provinces," said
Lucky Sondakh, professor of economics at the local Sam Ratulangi
University.
Mangara Tambunan, Managing Director of the Center for Economic
and Social Studies in Bogor, West Java, concurred that market
forces wouldn't stop the disparity.
"I'm even afraid that if the present system of infrastructure
financing is maintained the regional disparity will become
wider," added Rizal Ramli, director of the Econit economic
research center in Jakarta.
Rizal saw infrastructure development as one precondition to
stimulate economic activities in the eastern region of Sulawesi,
Nusa Tenggara, Maluku and Irian Jaya.
He reckoned the central government should accelerate
infrastructure development with public financing.
"State intervention is required at the early stage of
development in a region," he pointed out.
Sondakh observed that North Sulawesi, for example, is the
closest province to the Pacific region.
"But how could this province tap the market opportunities to
be created by the free trade within the Asia Pacific Economic
Cooperation forum in the year 2010 if its economy remains the
least developed," Sondakh contended.
The eastern region will benefit from deregulation only if it
is coupled with the decentralization of economic decision making
and bureaucratic reform, Sondakh contended.
Conducive
But he wondered whether the political environment is conducive
to such reforms because decentralization means sharing power.
Improving economic competitiveness and efficiency in the
eastern region is not therefore entirely an economic problem.
Sondakh is afraid that if decentralization is not implemented
and licensing procedures are not further simplified, the process
of transfers of surpluses from the eastern to Java and Sumatra
will continue.
"We are not asking for assistance but for justice in return
for what our region had contributed to the western provinces over
the past 25 years," noted Jusuf Kalla, Chairman of the South
Sulawesi Chamber of Commerce and Industry.
Kalla recounted that in the early 1970s when the government
started industrial development in Java, most primary commodities
in the eastern region such as coconuts, timber, nutmeg, fish and
rattan were subjected to regulated trade to secure cheap input
for industrial firms in Java.
"As the prices of their primary commodities were controlled
the income of the people in the eastern region was virtually
capped," Kalla pointed out.
Since the eastern region lags far behind the western region
the government is obligated to help accelerate the development of
the eastern islands, he said.
"We are only asking for what we sacrificed a long time ago,"
Kalla said, warning that the wide disparity between the eastern
and western regions could become a source of political
instability.
Tambunan suggested the central government design a special
development policy for the eastern region because its economic
problems are structural in nature.
"Our development planners should undergo a mental switch to
fully understand that the economic condition and resource
endowments in the eastern provinces are different from those in
the western region," Rizal pointed out.
The government, according to him, should realize that policy
instruments effective for high-growth provinces are not
automatically effective for low-income and low-growth areas.
The different approaches should, for example, be reflected in
resource allocation policy, Rizal argued.(vin)