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)