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