Monday, September 13, 2010

Parts Washington, Beijing and Delhi: The Jakarta Consensus

When Indonesia was under the care of the International Monetary Fund in the late 1990s, it was hard for many to swallow the bitter pill of the Structural Adjustment Programs. Cutting state subsidies made life miserable for millions, and many questioned the wisdom of adopting an economic structure based on the so-called Washington Consensus. Today, given the current state of the US economy and the spectacular economic success of China, many suggest that the Beijing Consensus — a combination of a strong state and a market economy — might be a more workable approach for developing countries like Indonesia.

On Sept. 5, after a fast-breaking event with coalition leaders at his private residence in Cikeas, President Susilo Bambang Yudhoyono proposed a different idea altogether: the Jakarta Consensus.

Indonesia should develop its own distinct concept of development, the president said, one based on political stability and law enforcement, balanced roles for the government and the market, integration into the global market without succumbing to the multinationals, growth with equity, the domestic market and a multiparty presidential system.

Of course, there is no definitive answer to the question of precisely which system would work best in a particular nation.

After all, China and India are examples of two different types of political regimes that have enjoyed more or less the same level of economic success.

An Indonesia economic paradigm would have to take into consideration the features of the country and people, and chart its own waters.

This prospect requires an assessment of the state of government in our economic development. Whatever the political regime, sustainable economic growth requires a strong state.

Since independence, however, our government has failed in developing a strong state.

During Sukarno’s period, the state was made subject to or was dictated by his personal ambition.

Suharto’s state was strong but it was led in the wrong direction. No wonder that after 32 years it collapsed with its creator.

When BJ Habibie came to power, many were delighted because they thought the brilliant engineer might have some recipes for improving the performance of our strategic industries.

As it turned out no significant progress was made and even the aircraft industry, Habibie’s favorite, inherited the problems handed down from previous regimes.

President Abdurrahman Wahid was committed to improving the economy, but his erratic style created more confusion than anything else.

Although President Megawati Sukarnoputri managed to stabilize the economy, there was no significant progress during her rule.

With his strong political mandate, Yudhoyono should have been able to develop a strong and effective state. Instead, the public has been left disappointed for at least three reasons.

First, our nation is still lacking effective leadership for institutionalizing good governance.

Some say Yudhoyono is more of a thinker than a decisive general, and complain that he takes too long to think about an issue before he comes up with no policy at all.

Second, a combination of inconsistent law enforcement and the culture of bureaucratic bargaining has turned the government’s fight against corruption into a bad joke.

And third, many new democracies, including Indonesia, have failed to achieve a higher level of economic growth because they have weak bureaucratic and economic institutions.

Studies have shown that stronger banking and tax systems, law enforcement bodies and public and private corporations have a direct impact on the acceleration of growth.

Yudhoyono has conducted regular evaluations of his ministers, but he should have dismissed those found to be lacking in their performance.

China and India may have different political realities, but they have this in common: Not only have they managed to develop effective national competitiveness, they also have created a synergy between public and private institutions.

For instance, Beijing has poured billions of dollars into African infrastructure for Chinese businesses in the resource-rich continent.

The aggressive participation of India’s multinationals in the globalization of its business sector is a recognized interdependence between the government and the private sector.

If Indonesia wants to develop its own niche in economic development, it has to learn from its past mistakes.

We cannot continue to be satisfied with business as usual. Economic globalization is about competition, which requires a strong state, leaders with goals, harmony between public and private institutions and national competitiveness.

Jakarta Globe. By Aleksius Jemadu the dean of the School of Social and Political Sciences at Pelita Harapan University in Tangerang.

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