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

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.