'Sjafruddin's ideas are still relevant'

JAKARTA (JP): The thought of the late Sjafruddin Prawiranegara, a leading figure of modern Indonesian history, remains relevant today, a seminar heard over the weekend.

Dawam Rahardjo, director of the post-graduate program of the Muhammadiyah University in Malang, East Java, told a seminar here on Saturday that, although Sjafruddin's thought was very controversial in the 1950s, it is still relevant to economic policy under the New Order.

Sjafruddin, who graduated from the law school of the University of Indonesia in 1929, was minister of finance between 1949 and 1951 and was the first governor of the central bank, Bank Indonesia, between 1951 and 1957.

In 1948, when the provisional Indonesian capital of Yogyakarta was captured by the Dutch colonial troops and Indonesian leaders were arrested and exiled, Sjafruddin set up an emergency government in Bukittinggi, West Sumatra, to lead the nation's guerrilla forces.

As finance minister in the cabinet of Mohammad Hatta in 1950, Sjafruddin reorganized the Indonesian monetary system. His decision to cut the value of the rupiah by 50 percent sent shock waves through the young nation.

According to Dawam, Sjafruddin's ideas were similar to those of the so-called "Berkeley Mafia," President Soeharto's first team of economists, which was led by Dr. Widjojo Nitisastro.

As the group's pet name suggests, many members of the team were graduates of the University of California in Berkeley.

Dawam told the seminar, which was sponsored by the Al Azhar Islamic Youth Study Club, that "if Sjafruddin were alive today, he would have supported the recent government policy of deregulation and privatization and would be very enthusiastic about the trend towards globalization."

Sjafruddin had spoken about globalization at the time of glasnost and perestroika, in the former Soviet Union, and had predicted that communism would be replaced by "the market economic system," Dawam said.

Sjafruddin disagreed with the policy of providing protection and subsidies to state-owned companies, he added.

"According to Sjafruddin, if state-owned companies could not operate like private ones, they should be managed by the private ones," he said.

Dawam said that Sjafruddin had emphasized that the basis of economic growth was monetary stability.

"As governor of Bank Indonesia, he perceived that its main task was to keep the inflation rate as low as possible and maintained a strong rupiah exchange rate."

According to Dawam, Sjafruddin opposed deficit spending and pushed the idea of a balanced budget. His ideas were similar to the policies of the New Order government many years later.

Sjafruddin preferred foreign investment to foreign borrowing as it put the risk on foreign companies.

Dawam said that, in some policies, Sjafruddin clashed with Dr. Sumitro Djojohadikusmo, minister of trade and industry in Mohammad Natsir's cabinet.

The two men were involved at one stage in a newspaper debate about economic policy, including questions of inflation and agricultural and industrial development.

"The debate was so excellent and historical," Dawam said, adding that Sumitro had recently told him that he had valued Sjafruddin's opinions.

"Sjafruddin was right in his concept then. It is impossible to conduct industrialization without agricultural development as its base," Dawam quoted Sumitro as saying.

The New Order government later implemented an industrialization program together with an agricultural development, Dawam said.

"The latter was the priority," he added.

Sjafruddin emphasized agricultural development as a means of achieving two national targets: rice self-sufficiency and the rehabilitation of cash crop plantations in order to increase exports and foreign exchange earnings.

Sjafruddin did not favor the nationalization of foreign companies as a path to industrialization.

As Bank Indonesia governor, Sjafruddin conducted a systematic transfer of knowledge from the Dutch to the Indonesian personnel of the central bank, he said.

"By that time Sjafruddin had already come to realize that the main factor in Indonesian economic development was human resources."

Meanwhile, Sjahrir, a professor of economics at the University of Indonesia's School of Economics and a managing director of an institute for economic and financial research, told the seminar that Sjafruddin was opposed by his colleagues when he introduced Indonesian banknotes to replace the Dutch currency.

"It was almost the same as the devaluation of the rupiah against the U.S. dollar," Sjahrir said.

He said that, already in the 1950s, Sjafruddin had talked about the role of Bank Indonesia as a commercial bank.

Sjafruddin, who was born in 1911, died in 1989 and was buried at a public cemetery in Jakarta.

During president Sukarno's government he was arrested for leading a revolutionary Indonesian government in Sumatra in the late 1950s and early 1960s, even though the government of the time had pardoned him and his colleagues.

The revolutionary government in question, known in Indonesian by the acronym PRRI, opposed Sukarno's left-leaning democratic policies. (05)