The need for a new paradigm

The one-day economic seminar at the Center for Strategic and International Studies on Tuesday was conclusive about the need for a new paradigm for Indonesian development to gear up the country for global competition. The panel of such senior economists as Emil Salim, Sjahrir, Moh. Arsjad Anwar, Mari Pangestu, Djisman Simandjuntak and Bungaran Saragih charted out the demands of future market competition and listed the agenda for new reform measures to meet those demands.

The meeting understandably did not produce a clear-cut concept on which the new paradigm should be built. But the schools of thought among the economists share two fundamentals -- political reform (democratization) and good governance -- which they reckoned should be included in the new paradigm.

Emil and Sjahrir observed the wide gap between economic and political reform (democratization) which, if ignored much longer, could undermine the overall stability that is a basic prerequisite for development. Djisman considered good governance as a key factor to enable the business sector to compete in the global market. Mari and other economists did not explicitly cite good governance, but phrased it as an effective and transparent bureaucratic machinery that protects private property rights and upholds the rule of law.

Analysts and development economists overseas have often discussed the relations between democracy and good governance and economic growth. The largest development agencies -- the Manila- based Asian Development Bank and the Washington-based World Bank -- have also conducted comprehensive research on these issues, taking the economic success of East Asian countries as case studies.

The empirical studies were not so conclusive about the clear ties between economic development and democratization, in view of the wide diversity of the historical, social and cultural backgrounds of East Asian countries. But they all share the same conclusion that good governance is key to good management of economic development. The studies also show that good governance and democratization are basically intertwined. In fact, the requirements for good governance have increasingly been the subjects of policy dialogs between donors and borrowers.

Accountability, transparency and predictability are often cited as the fundamentals for good governance. As the East Asian experiences show, their sound development management rests on political and procedural predictability on the basis of legal and administrative autonomy from interest groups. This means that predictability grounded in institutions -- rather than stability grounded in persons -- is the key to sound development management.

The Asian Development Bank noted in a recent study on good governance that economic reform or liberalization will not produce long-term growth unless it is supported by institutions, norms and practices that sharply distinguish the interests of the state from the profits of entrepreneurial efforts.

However, it is credible public institutions that are the major missing component in Indonesia's overall development.

The government actually has been aware of the pivotal role of good governance to support the implementation of the packages of economic reform measures. But bureaucratic reform -- or debureaucratization, as the government likes to phrase it -- is not only still in its very early stages, but has little potential for developing good governance . The problem is that the process is separated from political reform and the building of civil institutions, which is the prerequisite for establishing accountability, transparency and predictability within the government bureaucracy.