Walking the walk on reforms

Walking the walk on reforms

Djisman S. Simandjuntak

Though people were not clear on the policy direction and priorities of the contenders in the general elections, all seemed to agree on the need for change, and the year 2004 was full of hope with peaceful legislative and presidential elections.

The country experienced its first direct elections and witnessed President Susilo Bambang Yudhoyono's (SBY) and Vice President Jusuf Kalla's (JK) landslide victory. They eventually formed a solid new Cabinet (nicknamed, the United Indonesia Cabinet).

All in all, the country has enjoyed a slightly improved economy with monetary stability, as reflected in the relatively stable rupiah against U.S. dollar and a low rate of inflation. To an important degree, this is because of low global inflation and a steep drop in the U.S. dollar.

Meanwhile, fiscal deficits have been kept within a pre- committed level of less than 2 percent of GDP and the debt-to-GDP ratio is falling near the level of 60 percent of GDP following an increase in income. At the same time, the state's balance of payments continues to improve as a result of a positive current account and a virtually balanced capital account.

Reserve accumulation continues to be just a fraction of overall bank deposits and the reserve remains small, while growth has accelerated slightly.

The peaceful election was an important step toward democracy. Real democracy is reflected in the mindset and behavior of the people, notably top-level politicians and generals of the not yet entirely depoliticized armed forces, in compliance with laws irrespective of rank in the government hierarchy.

The peaceful elections can also be observed by the party supporters' and voters' respect for human rights, for religious and ethnic diversity, their acceptance of power-sharing between the state and civil society and between different branches and levels of government. At the same time, their willingness to stick to consensus-building allows the republic to function.

Indonesians are aware of the gap that separates intent from content, as far as the political system is concerned.

On the economic front, Indonesia is in need of a return to high growth, but growth that is shared by a majority of the people and ecologically sustainable. The twin challenge of rapidly expanding investment and exports has long been understood, even before the change in government.

Flows to the stock market have risen and property is undergoing a strong recovery. Unfortunately, little has changed in machinery investment, so when one considers depreciation on such assets, the overall value of many companies has declined. As a consequence, unemployment has continued to rise.

However, the country's international competitiveness continues to weaken as reflected in declining shares in trade, foreign direct investment inflows and the world income.

The landslide victory of SBY and JK is a reflection of hope rather than proven performance. While trying to do justice to the rising hope, the new government is faced with a slightly deteriorating global economic environment characterized by a very high oil price, a current account deficit in the United States (in excess of what is perceived to be sustainable), a perceived need for realignment among the currencies of major trading economies and a strained fiscal position in the U.S., Japan and Germany.

In facing the challenge, the new government is staffed with some new ministers, but the bureaucracy remains largely the same in spite of the fact that many have long been calling for a major overhaul. Corporate leaders have also hardly changed.

There is clearly a need for innovative changes in investment and trade policy, particularly considering Indonesia's tainted image on the one hand and the rise of new star economies on the other hand. It is absolutely crucial that investors see credible signs of progress in fighting corruption, real changes in law enforcement, a proper balance between labor rights and output, as well as a considerable investment in human capital.

People do agree on the core items of the agenda, but they differ on more peripheral issues. They also seem to agree on the imperative of action. Some "islands of integrity" have also been created.

However, people are inclined to simplify matters without paying proper attention to the question of "how" because of the prolonged wait for change. Indonesians must not become complacent and allow democratically elected leaders to deteriorate into first, authoritarians and later, quasi-kings, who can "do no wrong" That would be an unfortunate repeat of past mistakes of exalting leaders to an unchallenged throne, only to unseat them disgracefully later.

As legislators in this country have often fallen into a cycle of corruption, a carefully monitoring civil society is indispensable.

However, President SBY's campaign motto "together we can" must be applied to his post-election period even more. Such togetherness requires binding glue. Under the current environment, the glue will have to include concrete action and progress in law enforcement and anticorruption programs, starting first with the head of the government.

Election to leading positions is not a privilege to put oneself beyond the reach of the laws, but an obligation to be superlative in lawfulness. The glue can also include unquestionable respect for political and cultural diversity and determination to resist any temptation of resorting to undemocratic processes, while settling differences.

If these things come about, Indonesians will indeed make 2005, the 60th year of independent Indonesia, the first important step in the journey of a thousand miles to a respected place in the community of humans.

Executive Director of the Prasetiya Mulya School of Business