Strong governance needed to maintain economic growth

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)