Thu, 26 Oct 2000

Update looks at unusual scenarios

By Dewi Anggraeni

MELBOURNE (JP): Pessimism and optimism aside, Indonesia's economy is on the mend. The Indonesia Update conference at the Australian National University in Canberra, Australia, earlier this month, looked at the country in the 20th century and in the future.

While the 20th century seen from the angle of political history uncovered more gloom than sunshine, according to some economists at least, things are looking up. In other words, economically we have hit rock bottom, and the only way is up.

Statistical data shows that consumers spending figures are promising and so are realized domestic investments. Kelly Bird, an economist working for the National Development Planning Board (Bappenas), indicated that after contracting by 13 percent in 1998, then plateauing for most of 1999, the economy began to record growth from the fourth quarter of 1999. If the current economic growth trend is maintained, Bird said, the economy could expand by 5 percent, a rate similar to that projected for Thailand.

National income accounts and other real sector indicators pointed to economic activity picking up in the first semester of 2000. Bird is optimistic that the economy will grow faster than reflected in the official estimates.

There is a big question mark behind the banking sector, however. The slow progress in corporate debt restructuring and asset sales under the Indonesian Bank Restructuring Agency (IBRA) has caused a sluggish growth in investment. Other contributing factors mentioned are the lack of legal and judicial reforms protecting the rights and obligations of creditors and investors, and the seemingly unending political instability.

Many have also argued that the specter of national disintegration has not been exorcised.

Usually, when the issue of national disintegration rears its head, political analysts and observers will quietly shake their heads, intoning various mantras to dispel the descending gloom, mumbling how bad it will be for the government in Jakarta.

Java, it is believed, will wither and eventually be paralyzed financially without the other islands. This indeed happened to a degree at this conference, and would have left the participants with a feeling of pity on Jakarta, but for one historian's views.

What the historian, Robert Cribb of Queensland University, presented to the participants was not exactly brightly optimistic.

Exploring decentralization with its accompanying promises and pitfalls, Cribb pointed to the likelihood of Indonesians looking for alternatives if it indeed failed.

Giving examples of fallen "empires" such as the Ottoman empire and the Soviet empire, Cribb theorized that the common reason was the supposedly dominant ethnic group grew tired of the burden of the empire and decided to seek its independence.

Then he drew a parallel to Java.

Cribb argued that the conventional wisdom that densely populated Java needed the other islands for its survival was the thinking of the 19th century. We now live in an era of globalization, where access to resources does not correlate with political control.

In the last three decades, Java has gone through extensive transformation. The rate of population increase fell dramatically, and it enjoys the concentration of industrialization and foreign investment.

As for necessary natural resources, an independent Java would be able to access them from other places without having to have political control over these countries.

Similar views were once aired by Ken Thomas, a retired academic of LaTrobe University in Melbourne, in a discussion group held regularly by the Indonesia Program at the University of Melbourne. Thomas pointed out that economically Java was stronger than other islands, because it was much less dependent on the exportation of natural resource commodities.

Java was exporting manufactured and value-added items which had attracted large domestic and foreign investments, Thomas said.

Cribb also reminded the conference participants that Java had a large and relatively well-educated population and sound infrastructure.

All this only points to one thing: in a worst-case scenario, Java is ready to take off, waving goodbye to even the resource- rich islands, which would sooner or later come, cap in hands, offering trade with Java. As Cribb said, independent Java could be another Thailand or another Taiwan.

What is even more thought-provoking, tempting as well, Cribb even suggested that Java could even begin to free itself of a military which had learned the habits of brutality, corruption and resistance to civil authority, by exporting them out. Surely that was just a throwaway line to keep the participants awake?

This year's Indonesia Update certainly had a curious blend of optimism and pessimism.

The writer is a journalist based in Melbourne.