RI answers WB's call for institutional reform
RI answers WB's call for institutional reform
Berni K. Moestafa, The Jakarta Post, Jakarta
The World Bank puts institution building at the heart of
sustainable development in a report signaling the possibilities
Indonesia's economic reform program presents for building better
institutions, and the risk if the country fails to seize the
opportunity.
Sustainable development hopes to align global economic growth
on one side, with the decline in world's assets and the growing
population on the other.
"Development is sustainable if the rules of the games are
transparent and the game is inclusive," said the opening sentence
of a recent report by the bank titled the World Development
Report 2003.
The world's assets -- be they physical, financial, human,
social, or environmental -- are limited and thus need better
management of their portfolio, the report said.
It said that assets overexploitation and shortfalls could be
resolved by improving markets and the institutions behind them.
"Many appropriate policies are known, but not implemented
because of distribution issues and institutional weaknesses," it
said. "Competent institutions pick up signals, balance interests,
and execute agreed-on decisions."
Such institutions may be state owned, private or independent.
To increase their competence, the report added, the poor
and disenfranchised should be given access to decision making.
The message comes at a time when Indonesia's economic reform
program demands sweeping changes on how institutions here run
this country.
Economic reforms have began since before the demise of
Soeharto's authoritarian regime in 1998.
His fall led to a more aggressive take on Indonesia's economic
malaise and the transition into a democracy. This has opened up
the opportunity to reshape the country's economy with greater
public participation. "When more people are heard, fewer assets
are wasted," the World Bank report said.
Led by the International Monetary Fund (IMF), Indonesia's
reform program aims to purge market inefficiencies and instill
macroeconomic stability.
Although not tied to sustainable development goals and often
criticized as even contradicting them, the IMF program also deals
with institutional reform issues.
For instance, corruption is undermining the effectiveness of
foreign loans that international agencies like the IMF or World
Bank provide. Part of these loans are being used to fund projects
related to sustainable development.
The IMF program, also known as the Letter of Intent (LoI),
calls for an anticorruption committee, transparency in state
asset sales and improvements in the country's judiciary.
Such structural reform programs are more the work of the World
Bank and the Asian Development Bank (ADB). Still, their programs
depend on progress with the LoI which the IMF leads.
Indonesia as the fourth most populous nation in the world, has
much to gain from molding its economy into a more sustainable
pattern.
Despite ongoing steps toward reform, environmental and social
conditions have worsened.
Soeharto's downfall teared down institutional control over the
market and other social aspects. Yet the resulting power vacuum
also led to legal uncertainties.
Illegal logging, mining and fishing are worse than ever.
Widespread corruption within the country's judiciary
undermines efforts to fight these illegal businesses and reduces
foreign and domestic investor confidence in the country.
Analysts have said the pace with which the institutions were
reforming is too slow to arrest the environmental decline.
So far foreign creditors and public pressure through the media
have been the biggest driving force behind reform.
Non-governmental organizations have decried the lack of a
political leadership from both the government and the
legislature.
" ... a leader who takes steps to build stronger institutions
would reap benefits from the stronger economy and the better
environment only in the long run," said the report, adding: "this
requires a stable setting with broad political support."