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.