Strong governance needed to maintain economic growth
JAKARTA (JP): Asian countries need to maintain their strong governments but improve their accountability to maintain their high economic growth momentum, an expert said yesterday.
James R. Rohwer, the author of bestselling book Asia Rising, said at a leadership seminar yesterday that Asia's success was more because of authoritarian government and strong social institutions and values than favorable economic values.
"Asia will accelerate the shock waves that have already begun to destroy the Western world's assumption about public policy and social organization," Rohwer said at the seminar organized by law firm Prasetio Utomo and the Indonesian Capital Market Society.
But he said the rise of modern Asia had depended overwhelmingly on judgments based on personal trust and connections.
He said such lack of institutionalized practices run the gamut from opacity of company governance to lack of political accountability to paucity of infrastructure.
Sofyan Wanandi, chairman of Indonesia's Gemala Group, said such informality in doing business had benefited many Asian companies in terms of decision making.
"Not like in the West, where decision making is slow due to legalistic procedures, our decision making is much faster because of our informality," Sofyan said.
But Rohwer said Asia needed to move beyond its informal and personal way of doing business, of governing, and of handling relations between states and businesses if it wanted to maintain the momentum.
The kind of change you need is the kind that will create transparency in governing and in the way the companies are run, Rohwer said.
Sofyan agreed and said Asian countries needed more democracy in their politics and their economies. They also need a clear transitions of leadership in government.
"Unfortunately, we are still in the dark as to who will succeed President Soeharto. That's why, after the coming general election, I do hope that the ruling Golkar party would come up with the names of possible successors," Sofyan said.
He suggested Indonesia subscribe to the way leaders in China, Singapore or Malaysia grooming their possible successors.
Rohwer said Asian countries were allured to relax their rigid exchange rate management to reduce their exposure to rate fluctuations.
Rohwer commended Bank Indonesia's policy of relaxing its exchange rate regime by widening the rate band of rupiah against the U.S. dollar to 5 percent.
He also suggested Asian governments privatize some public infrastructure projects and offer attractive premiums to private investors, especially foreign investors, to invest in infrastructure.
Most Asian countries still needed large capital to finance their infrastructure development, he said.
Estimates show that at least US$1.5 trillion will be needed to develop infrastructure in Asia over the next 10 years.
In addition, Rohwer warned Asian governments of social and demographic changes. In Indonesia, for instance, elderly people, considered to be not productive, had in the last 25 years grown from 7 percent to 14 percent of the population.
"In France it took 130 years for the elderly to grow 100 percent, but in Indonesia, it took only 25 years," he said.
While most Asian countries are getting richer, Rohwer said they should not subscribe to social welfare programs adopted by Western European countries. Such social safety nets could erode their economies' competitiveness. (rid)