Adil W. Surowidjojo

A few weeks ago, I was invited to a fund-raising event for street children, held at a lounge on the top of the Jakarta’s tallest BNI building. One funny thing was that the fund-raising stopped at the front door (where you make your Rp 70,000 donation), and inside the lounge what went on was apparently an entirely different function; apparently the hosts wanted to pile together a night club and a promotion event for a boutique mobile phone into a coherent, humanitarian, and chic, whole. I understand that on weekends people want to have fun, but I just didn’t see a good enough reason to sublimate the main point of the event – to give money to street children (no specifics on what the fundraising was for were offered) – and have people feel like they’re just at another jet-setting socialite party. The night was striking for me because as a proponent of the freer market and wholesome capitalist ideals, I found that looking (far) down at Jakarta from the glass windows of the lounge made me feel that what we were doing was akin to dropping a teaspoon of water into the dessert. In theory I guess the reasoning was sensible: attract the affluent to a very classy event and you will get more money for your fundraiser, but just by being there seemed to heighten the sense of social inequality in Indonesia.

These thoughts took more of my attention because I had been thinking about Indonesia’s current consumption-driven economic growth. The argument goes that while any kind of economic growth must be a good thing, a consumer-driven one is the least beneficial because it does not set the foundations for the long term sustainability of overall growth. Furthermore, a society that spends more leaves less savings in the banks to support entrepreneurs and domestic investments. It is clear that proponents of this argument view that growth through investments is more viable in the long term, and that the country is in danger because our present economic growth is therefore unviable. However, it would be rash to conclude the failure of our economy without delving deeply into the issue: firstly, we must discern what are being consumed in the economy, and by whom, that has made it possible for Indonesia to sustain a decent 4% GDP growth of late; secondly we must, from answering the previous questions, be ready to present the government with options and suggestions on how to improve on the present situation. The question of “who buys what from whom” is a simple one with overly complex answers, as a nation’s economy is affected by numerous factors, from security to climate change, but we must be able to discern a few major issues that will be most pertinent in the short term – a period when Indonesia should be focusing on laying the necessary foundations of its economic revival.

Soesilo Bambang Yudhoyono has enjoyed a significant success in being the front-runner of the presidential run-offs; at this moment Indonesia breathlessly awaits the new cabinet SBY will choose from now until 2009. At this critical moment in time, it is imperative that the SBY economic team shall answer the questions posited above and tackle the challenge of reinstating a healthy economy in Indonesia. At the moment, Irsan Tanjung is one of the SBY economic teams’s thinkers, and Mr. Tanjung – who is an academician from the University of Indonesia Faculty of Economics, and is rumored to be a candidate for a member of the next Cabinet – is keen on increasing government spending, therefore worsening the state budget deficit. In Tempo magazine’s spotlight on Irsan[i], the economist is said to be focused on bringing about a better kind of economic growth and opening up new work opportunities for the people; indeed, as a member of the SBY campaign, one of Mr. Irsan’s key contributions was to compile the campaign’s ideologies that address national economy and social prosperity. The Tempo spotlight went on to call Mr. Irsan an unorthodox and brave economist, because his plans are counter-intuitive to what ‘conservative economists’ (read – laissez-faire) would deem a healthy plan for a nation competing in a global economy. Perhaps if we take the view that the government is a patriarchical body that is most interested in the well-being of its populace, this system may work out well in the sense that a disciplined fiscal program by the State would jolt domestic businesses into line. However, the cynics among us are too well aware that in the real world, there is no such thing as a free lunch: by definition, governments maximize votes, just as firms maximize profits, interest groups maximize the effects of their rents, and households maximize utility. In this framework, a government that is going to increase government spending will have to also increase its taxes, and this alone will scare investors away to tax havens of the region. And we have not even begun to discuss the follies of Big Government in a socially permissive and passive country such as Indonesia.

To be fair, SBY’s economics team also receives inputs from other economic think-tanks (as is obvious from the Tempo article title); Joyo Winoto, a Doctor of Political-economy who studied at the Michigan State University, is the head of the Bogor-based Brighten Institute team, also a prominent source of policy-design and campaign ideology for the SBY team. Mr. Winoto also focuses on public prosperity through reducing unemployment and poverty, but he puts more emphasis on empowering Indonesia’s remote villages and small to medium agriculture industry; in order to achieve this, he posited that more work on micro-economic policy making needs to be done to addres problems in taxes, customs and tariffs, labor management, regional autonomy, and bureaucratic transparency[ii]. From the outset, Mr. Winoto’s overall strategy seems to be quite balanced and at the same time thorough and methodical; for one thing, addressing the confusion and inefficiencies inherent in the current forms of Indonesian regional autonomy and bureaucracy – and perhaps here Mr. Winoto would do well to specifically address the problem of corruption – will do much to repair the ailing investment climate in Indonesia. An important and interesting story to note here is that SBY was recently tested for his doctoral degree, which is on the empowerment of the people’s economy. At the very least, it is certainly refreshing that trying to prove one’s credibility and accountability in a real and substantial manner is finally catching on with Indonesia’s leaders; hardcore SBY supporters must be positively ecstatic with this little tidbit. In hindsight, SBY’s campaign discussed these sort of issues generously, one memorable example being SBY’s plans to reform the tax system to increase revenues, which will fund budget increases that in turn will fund government spending to improve public welfare; all ideological, revolutionary, and yet pragmatic stuff which will be interesting to watch if they do come to pass.  

The third think-tank for the SBY economic team was a group that supported Jusuf Kalla, which focuses on the empowerement of native Indonesians through policies reminiscent of ‘affirmative action’ in the US – which proposed favorable policies towards racial minorities such as African Americans and Hispanics – to lessen the gap between the rich and the poor. Perhaps the most alarming thing here is that presently in the US, affirmative action policies are under attack by critics who deem that these sort of policies actually aggravate the gap between the rich and the poor, by nurturing a sense of complacency in the part of the minorities the policies were supposed to empower. Funnily enough, some white Americans observe that affirmative action is an essentially racist (as it is biased against white Americans) solution for the alleged problem of racism in the US. With regards to these sorts of policies, Indonesia would do well to observe developments in Malaysia, where officials have discussed that their version of affirmative action was actually harming the market as a whole by overlooking vast numbers of capable persons in favor of certain minority groups in pursuit of a sense of social ‘fairness’; the outcome is unfortunately less efficient than a standard system that does not endorse certain groups. Perhaps even more important is Indonesia’s policies in addressing the various ethnic/religious tensions in the archipelago; the concepts of multiculturalism and perhaps more specifically the concept of transmigration, while attractive in theory are difficult to achieve in practice as tensions have been sublimated in pursuit of short term solutions, leaving veritable time bombs that threaten Indonesia’s cohesiveness in the long run. Because of the nature of Indonesia’s nation of islands, it is perhaps better to preserve the cultural authenticity of each region; for example, in the case of movement from region to region, let the onus of cultural integration fall upon the newcomers, and enforce it, etc. These worries aside, it is an unquestionable fact that a vast number of Indonesians form an untapped resource wanting of education and training; hopefully SBY’s economic team will be able to formulate policies that truly empower them without compromising the balance of the market.

Of course, as with anywhere else in the world, the Indonesian political scene is never so simple. For instance, there have been reports abound that SBY’s views on economic policies are also influenced by other, publicly undisclosed, economic teams and economists, such as Marie Pangestu. Furthermore, we are not yet certain where SBY stands with regards to the London Club, the Paris Club, and CGI discussions. With regards to more specific issues, SBY needs to declare his stance concerning the recap bonds issue, how to deal with black conglomerates who have drained State funds (who are now asking for release and discharge), and perhaps most importantly, his plans to support the Corruption Eradication Commission in real terms – such as ordering the attorney general to support the CEC fully and transfer all significant and relevant corruption cases to be handled by the CEC. As the winner of Indonesia’s first direct presidential elections, it is SBY’s responsibility to fully disclose all of his sources of information and analysis that will affect the nation’s economic policies, as well as declare his own plans to better Indonesia in a more thorough manner.   

What we have discussed above only scratch the surface of the complexity of Indonesian economics; it is a blessing that SBY’s economic team is composed of such discrete thinkers, and even the input of such reknowned economists as Lin Che Wei. In the words of Mr. Irsan Tanjung: “Competition is good, SBY must not only heed one side… we would be mistaken if we view ourselves as unchallangeable”[iii]. Indeed SBY’s team will need to choose its allies very carefully over the coming months; the latest bomb attack in front of the Australian embassy shows how easily all our hard work and progress can be made moot in an instant, and Indonesia needs to be very aggressive in rooting out all elements that threaten national unity and our economic development, whoever they may be. The last regime has done a laudable job in stabilizing the Indonesian economy, but Indonesia’s households must be jolted out of their consumerist paradise, if only for a short enough time for them to consider seriously what direction our economy must take to redeem our place and dignity in the world. [aws]