24 Juni 2010

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Democracy makes development ‘messier’

After the resignation of Sri Mulyani Indrawati under political pressures over a controversial Bank Century case in which no evidence of her civil wrongdoing has been found, the Indonesian people were shocked, while some were amused and confused.
Before we finished cleaning the dust from our shoulders, there came the crazy idea about the Parliament’s aspiration funds proposed by the same legislators who cheered the resignations of then finance minister, who is known to be an uncompromisable reformist. If this is the end of the reformation period, then, where are we going next?

Any important national issue, including those that involve the national budget, should not become political footballs, nor just the elites’ game. Like a democratic India, democracy in Indonesia makes national development “messier” because any citizen can freely raise their voice.
But, the issue here is that democracy is constrained. Many Indonesians are not well-educated and are politically uninformed to participate in economic and political arenas, and they lack the basic needs to survive, making them subject to political bribes. Local accountability assumptions do not work in this
institutional setting.
Indonesia’s declining poverty (from 16.6 percent in 2007 to 15.4 percent in 2008 and 14.2 percent in 2009) and unemployment figures (from a peak of 11.2 percent in 2005 to 8.4 percent in 2007 and 7.4 percent in February 2010) are not something we should be content about. For 2009, the US$1.25 Purchasing Power Parity (PPP) headcount index is 16.77 percent while the $2 PPP headcount index is 50.03 percent.
Interestingly, these numbers show that almost doubling the poverty line increases the poverty rate by more than double, indicating the high number of people living just above the poverty line. Inequality has also been increasing, according to Asep Suryahadi at SMERU. 
Out of the total employment, only 31.4 percent works in the formal sector while the rests work in the low value-added, low productivity informal sector.
Our formal sector employment share is below the East Asian regional average of 43 percent and global average of 47 percent.  Employment elasticity has also decreased since the 1997 Asian Financial crisis (from about 400,000 to currently only 250,000 jobs created per 1 percentage economic growth)  that can be partly blamed on the slower growth of the manufacturing sector that absorbs a lot of formal employment from a double digit figure to a low single digit figure.
On top of political issues and the economic symptoms we see above, institutional constraints have also become a continuing issue in Indonesia, despite hard-fought bureaucratic reforms over the past few years.
It has been widely known that Indonesian institutions perform poorly in terms of serving the public. One example is the long and unclear process that a civil servant must endure before going abroad.
To apply for a visa to enter a foreign country, a civil servant must obtain an exit permit from the Indonesian government and a diplomatic note from the Foreign Ministry.
There are no clear guidelines and procedures on how to apply for the exit permit and diplomatic letter.
As a result, many civil servants must find an insider in the departments involved to help them take care of the two important letters quickly. And of course, the practice is very prone to bribery, not to mention the uncertainty and the loss of a considerable amount of time that the civil servants must cope with.
The problem above is very ironic since many government offices encourage their employees to study abroad to enhance the quality of their human resources. Therefore, the willingness to sponsor and encourage Indonesian human resources to study abroad, must be accompanied with the willingness to implement a clear and simple procedure for them during their course of study.
One issue that needs to be highlighted here is the uncertainty of daily life activities many Indonesians, especially the vulnerable, have to endure because of the absence of rules. By rules, we mean rules that work and not rules that must be bypassed by money.
There is no separating line between what is right and wrong. It is worth thinking hard about how we can start building a rule-based institution to sustain greater economic activities.
Institutions are also badly needed to implement structural reforms, which have become national  and international commitments (reiterated in the G20 Framework). They are the organs of state that will shape the democracy and quality of economic growth as well as social welfare.
The reformation period has note ended.  It is only a rhetoric of hopelessness.

Maria Monica Wihardja, The writer is an associate fellow at the Centre for Strategic and International Studies, Jakarta, and a lecturer at the Faculty of Economics, the University of Indonesia.

Opini The Jakarta Post 24 Juni 2010