Will McDonald's and 'Warung Tegal' over meet?

By H.S. Dillon

JAKARTA (JP): The recent exchange between Kwik Kian Gie and John Dodsworth on the heels of an understanding to release another batch of funds by the International Monetary Fund (IMF) caught me somewhat by surprise.

Kwik had appeared to be always willing to accommodate the IMF, but obviously this time he thought that enough was enough. As chieftain of the Indonesian economic bureaucracy, Kwik had every right to put Dodsworth, IMF's Senior Resident Representative in Jakarta, in his place. To be fair, however, Dodsworth certainly thought that he was merely doing his job by snapping at Kwik's heels.

While the stops and starts of the Letter of Intent and disbursement process have become a part of our daily economic life, there is a growing frustration with the process as a whole.

In many countries, this is what is described as "adjustment fatigue" --- the accumulated sense of frustration amongst the lenders, the government and the population with the pace and pattern of policy-based assistance.

Most recently, tempers became frayed once again, as Kwik muttered that exchange rate volatility had no base in economic fundamentals, and as Dodsworth weighed in to insist that only a market-based exchange rate could restore the mystical goddess of "confidence" to Indonesia.

At times in the IMF/World Bank negotiations with the Indonesian government, it seems as if the two sides are talking at cross-purposes.

President Abdurrrahman Wahid asked for a focus on agriculture and small enterprises. The IMF/World Bank pundits promptly responded with demands for free trade and a reduction in subsidized credit. Should the two sides in the policy negotiation process be frustrated? I don't think so.

One must start by recognizing that the IMF/World Bank has a set, or "orthodox" approach to stabilization and adjustment in all countries experiencing economic distress.

The Washington consensus is built around macrostability, fiscal prudence, free trade and pro-business structural policies. It is a rather set recipe --- just like that on offer from a McDonald's --- for what ails an economy in distress, be that Indonesia, Russia, Brazil or countries a zillion times smaller.

And just like a McDonald's, the IMF/World Bank promises quick results when good policies are put in place. This, plus the fact that in this case the customer doesn't have to pay the bill with the order, but gets to draw-down credits for their fast food policy meal, is certainly part of the allure.

Now, the government of Indonesia (like large segments of the elite), certainly is fond of imports. What is "imported" is often deemed to be "modern" or somehow better than domestic goods.

So, of course, when economic disaster strikes, there is a tendency to go first for the "import". But sometimes, the "imported" fast foods don't really seem to satisfy the Indonesian appetite.

Or, to put it differently, sometimes the imported solutions don't seem to work terribly well in Indonesian circumstances. After more than two years of being on the IMF/World Bank diet, the exchange rate is still far from stable; the public debt overhang is astonishing; the banks are still far from sound despite the fortunes that have been spent; corruption is endemic; the legal system isn't fair and impartial, corporate debt and distress are still there; and poverty is pervasive.

Of course, there are signs of progress, such as an agriculture sector recovering from a drought, but it would be rather far- fetched to ascribe the good weather to the wisdom of the IMF/World Bank Mc-Policy package.

Periodically, there are those Indonesians -- myself included -- who long for a meal of satay and gado-gado, and wish that we could use "home-grown" policies to tackle our economic and social problems.

This longing for a good home-cooked policy meal is certainly behind Kwik's lament for a (government-enforced) stable exchange rate. Gathering the cronies and demanding that they "cover" the public debt might be another Indonesian-style approach to unlocking the corporations and the banks.

Directing all manner of public support to the poor and the small farmers, in a flurry of bottom-up and top-down programs, might be another way to have the people's economy lead the recovery process.

But these would be warung tegal (local foodstall) solutions. And while they might satisfy our hunger -- or as the Americans would say -- hit the spot -- they certainly aren't on the menu at McDonald's.

Dietary habits are hard to change. Our policy leaders seem to have acquired quite a taste for McDonald's style fast-food policy.

But there are many political, business and economic leaders who are still rather fond of home-grown fare. It would serve us well to take a lesson from the people, the rakyat.

When given a choice between McDonald's or Warung Tegal, the latter wins hands down. Perhaps the IMF/World Bank high priests could confine themselves to what they know best, and leave detailed policy-making to Kwik & Company.

By allowing democracy to lead us to a meal that really "hits the spot", the twain might even meet. Only with a strategy endorsed by the majority of Indonesians can we hope to embark upon a meaningful recovery.

The writer chairs the Jakarta-based Center for Agricultural Policy Studies.