Taiwanese agrarian model for RI economy

Taiwanese agrarian model for RI economy

By Peter Richards

JAKARTA (JP): Indonesia, the fourth most populous country in
the world, often behaves like a banana republic characterized by
small population with a single resource. This is a modified
continuation of the dual economy of the Dutch colonial era.

In this dated arrangement, the dominant (export) economy is
carved out of the whole and has rich potential. But it is in the
hands of a few whose domestic concerns are limited to exchanging
profits for protection, and whose orientation is largely to
foreign capital, technology and consumption patterns. The others'
economy lives less well, much of it around the subsistence level
-- above it if the dominant system is prospering and "benign".

If a handful of a population controls a disproportionate share
of the economy and its fruits, there is a clear equity problem.
If that handful shares some cultural characteristic (ethnicity or
family ties), then there is potential for a significant political
problem.

The Soeharto family has such a problem, but apparently it is
not too serious. The family sits protected in their Jl. Cendana
residence in Central Jakarta, with most of their fortunes said to
be offshore while Indonesia borrows and borrows again.

Some Chinese-Indonesians have a similar problem. Much of their
liquid capital is abroad, but a lot of their wealth (and the
country's) is tied up in physical assets which have ceased to
perform as a result of huge foreign debts which cannot be repaid
at current exchange rates. And they do not seem to be protected
by small armies of troops.

Meanwhile, the majority of Javanese and Chinese who are not
members of the right families seem to be in the same leaky boat
(especially in places like Surakarta in Central Java). Except
that the Chinese seem to be paying more directly for the sins of
the wealthier members of their ethnic group while the suffering
of the average Javanese is more protracted.

On the whole, other Indonesians, most of whom happen to share
the characteristic of being Moslem, feel disadvantaged in a wide
variety of ways. It is said (some of them in fact allege) that
they congenitally lack the business acumen of the Chinese. Their
relative disadvantage may rather be the result of cultural
practices that encourage household savings -- rather than
dissipating wealth to numerous kin and clients -- and which seek
political protection in exchange for economic privileges that are
less than optimally productive and efficient.

In short, there are plenty of Indonesian entrepreneurs but
they are typically in the informal/subsistence sector because
they lack the capital and information -- or the connections -- of
the conglomerates. They also lack the management skills that only
money can buy.

Some advocate an Indonesian economy based on vertically
integrated agriculture in which the people would play a
fundamental role. This approach is appealing from a number of
points of view.

This would be a modified form of Taiwan's agrarian model with
many competing small and medium Indonesian enterprises providing
input in the vertical planting, harvesting, processing, packaging
and selling of world class products. Such products would compete
internationally and domestically, and would discourage imports in
the country precisely because they are of world class.

Similar vertical transformation could be applied to such
sectors as mass private and public transit and transport. These
must continue to move people and goods even in times of economic
crisis. Vertical domestic production would mean that spare parts
would be affordable.

High technology would be domestically developed for the better
production of those resources and needs to be relevant to
Indonesia's reality as a geographically extended developing
country with a varied tropical agricultural resource base.

Such a strategy would assure strong Indonesian exports in good
times in the global economy and would also help protect the
country from the worst consequences of global financial or other
economic crises.

It would also engage more Indonesians as participants and
beneficiaries of the dominant economy and would thus release
Indonesians from the lamentable vestiges of a political economy
better suited to a colonial situation.

As President B.J. Habibie said in his recent address to the
nation: "History has recorded that nations which wish to meet
with success must always be prepared to realign the direction of
the realization of their ideals".

It will not be easy to get from the currently shattered
economy to a new form that would assure a return to the condition
before mid-1997, let alone the rapid growth of the years before
that. Nor, in the current and foreseeable international economy,
could a return to growth based so heavily on exports alone be at
all assured.

There are many competitors for the share in sometimes
recessionary and/or glutted markets that Indonesia's economic
crisis has put paid to in the past year. So why not consider
seriously an economic system that might be far better for more
Indonesians than any tried so far?

The writer is a former Canadian diplomat who is now working as
a tourism marketing consultant for the Indian Union Territory of
Pondicherry. He has written this article in a private capacity.