RI needs new political foundations

RI needs new political foundations

JAKARTA (JP): Indonesia needs to reappraise the building
blocks of its political stability now that new aspirations are
emerging, economic and structural changes are occurring and new
social classes are growing, a senior economist observed
yesterday.

"This is one of the new challenges we are facing as a result
of our development successes over the last 30 years," Emil Salim
said. He is a former minister for the environment and population
and now a professor at the University of Indonesia.

Emil said the experience of countries with similar development
patterns have shown that the trend is moving towards greater
human freedom and a bigger role for people's participation and
involvement in economic and political development.

"A denial of these changes may jeopardize political stability
and disrupt economic stability and the development process," he
warned. He was speaking at the graduation ceremony of the
Indonesian Institute of Management Development.

The business school yesterday inducted 30 new graduates to its
master in business administration (MBA) program.

Earlier in his address, Emil, one of the country's most senior
economists, recounted the greatly impressive achievements made in
economics, society, education and other areas of the national
development.

But these achievements, he said, are bringing about the new
challenges of development.

He conceded that economic stability required political
stability and vise versa.

"But the new aspirations emerging, economic and structural
changes occurring and new social classes growing all increase the
need to reappraise the building blocks of political stability,"
he said.

Emil mapped out four other major new developments in
Indonesia.

One of them is related to development with equity. This means
the reduction of the number of people under the poverty line and
reducing income inequality and the enhancement of a more
equitable distributions of income.

"Inter-personal distributions of income towards equity become
necessary, especially in the urban centers where the discrepancy
between the rich and the poor is more noticeable," Emil said.

Emil considered that the focus of the income-distribution
problem lies in the question of raising employment.

Although the agricultural sector currently absorbs up to 50
percent of the country's work force, he said, the actual number
of workers in the sector has shown a decline over the last few
years, dropping from 40.5 million in 1990 to 37.7 million in
1995. Meanwhile, the overall labor supply is increasing.

Another challenge, he said, is to develop with efficiency.
This can be determined by a country's incremental capital output
ratio, or the unit of capital required to generate one unit of
output.

Most Asian countries, he said, currently have a ratio of
three, while Indonesia has a ratio of four.

Indonesia's high ratio -- revealing the degree of inefficiency
in using capital -- is caused, among other things, by red tape,
lack of infrastructure, low skill base and corruption, he said.

Other factors include the practice of vertically or
horizontally-integrating businesses and the concentration of
industrial activities on few enterprises.

Such practices, he pointed out, lead to monopolistic
practices, which, in turn, hamper the smooth operation of the
market,

"Price distortions also occur either through (hidden)
subsidies, restrictions on competitions and license
manipulation," he added.

He criticized the large conglomerates who are successful in
the domestic market but fail to meet the international market
competition, arguing that small and medium-scale firms are
instead a major contributor to the export trade.

Sustainable development is another major challenge.

"Sustainable development is aimed at enhancing the quality of
life whereby renewable resources are exploited at a level below
the threshold of renewability," he said.

The last but not the least challenge is to develop with a
global outlook.

"The growth of free economy is also related with the need for
free politics. A growing economy creates new classes in the
society with new needs and aspirations, not only economically but
politically as well," he said.

Globalization of the economy also spurs the globalization of
politics, he said. "Human rights, democracy and freedom become
the world-wide accepted aspiration of the people," he noted.

"Human freedom in politics must go hand-in-hand with human
freedom in economics and vice-versa," he said.

"Indonesia's development over the last 30 years... has brought
fundamental changes in our economy, social and political
environments which raise new challenges of development. These
changes require new sets of economic, social and political
paradigm of development," he said. (pwn)