Thursday, August 22, 2013



Sunday, August 17, 2013

Challenges for Indonesia’s Future

The Idul Fitri holiday in Indonesia has always been a time for forgiving. From the State Palace in Jakarta to houses of the elderly in rural villages, people are queuing to shake hands with those they respect, to ask for forgiveness. It is a wonderful tradition, in which people are rekindling their relationship with their relatives.
But the festivities also remind us of failed government policies. During the month of Ramadan, Indonesia has always witnessed the seasonal increase of key commodity prices, as demand soars but supply is constrained. The government’s recent attempt to lower the price of beef, chili, onion and other commodities fell flat and prices have stubbornly been at record highs.
Hasn’t the government learned anything? Months after the beef graft scandal emerged, there has been no sign that the government, in this case the ministries of trade and of agriculture, has been able to put its act together to tame the soaring beef prices. This has raised suspicions that there is foul play. Indeed, the Business Competition Supervisory Commission (KPPU) has announced that it is now investigating the beef trading practices.
The higher food prices indeed are the product of failed policies. And as long as the government continues to rely on ad-hoc policies of import measures to curb food prices, the country will remain vulnerable to seasonal stints of wild food price volatility.
What is social welfare?
The heart of policy discourse in this country rests on the presumption of what national social welfare is and how to measure it. The political rhetoric being advanced in this case is a populist one, namely to provide protection for domestic producers, farmers or SMEs.
Yet students of Economics 101 are acutely aware that social welfare is measured as consumer surplus, and the biggest surpluses arise from open, competitive markets. Any deviation from competitive equilibrium, be it in the form of inadequate supply or from government intervention such as administered quotas, will only result in greater benefit to producers — to the detriment of consumers, in the form of higher prices and lower consumption.
Our current problems can be traced back the famous Article 33 of our original Constitution of 1945, which emphasizes the importance of production in our economic system, and puts the control of key natural resources in the hands of state to achieve “maximum social welfare.” It has never been made explicit what this social welfare is, and it has since become a contested terrain politically. The standard bearing of populist argument has always been that social welfare is equivalent to protecting the weak and underprivileged, in this case farmers, SMEs and informal sectors, but not the poor as consumers.
In the name of protecting local farmers, the ministries of trade and of agriculture have imposed an ad-hoc quota regime, in which import licenses are arbitrarily allocated with administered prices. It doesn’t take a genius to figure out that such arbitrary policies have created opportunity for cronyism and rent-seeking. That is what’s been happening with the beef scandal, and trade in other commodities, such as soy beans.
But other areas of licensing and concessions are also rampant with regulatory arbitrage. Coal and other mining concessions are one such area. Radio frequency allocation — a critical national resource — is another. The arbitragers in these cases simply secured the licenses and then sold the concessions to other investors and made a killing. Similar things happen to the Java toll road projects, in which almost nothing has been achieved a decade after the granting of the concessions.
Competitive advantage
A few things deserve scrutiny to avoid the abuse of the system. First, the awarding of licenses and concessions is to be very selective. In the agricultural sector, soybean and wheat are not tropical crops and as such Indonesia will never have a competitive advantage in growing them. Therefore, protecting soy and wheat farmers is simply misplaced.
Rice and sugarcane are a different matter. Yet, overzealous protection and incentives to produce, such as what is happening in Thailand today, has created over-production and, more dangerously, over-dependence of Thai rice farmers on the subsidy. So we need a measured dose of incentives to yield optimal outcomes.
Secondly, open and transparent licensing is imperative. Closed-door granting of concessions will only yield cronyism and its attendant rent-seeking. In this regard, Trade Minister Gita Wirjawan’s attempt to rationalize import quota and licensing though open auction is on the right track.
One could only imagine if local governments would also use open tenders to grant coal mining licenses; the current mess in overlapping licenses would have been avoided, and the potential for concession or license trading would have been minimized.
Finally, the terms of any concession are of paramount importance. In the case of toll road licensing, the government’s position is very weak. There is practically no exit clause, as there is neither penalty nor consequence whatsoever if concession holders do not deliver or otherwise breach their contract.
Jokowi’s example
The current attempt by Jakarta Governor Joko Widodo to revamp the way the MetroMini buses operate deserves our wholehearted support. As it stands today, MetroMini is owned and operated by thousands of owners-operators. Why thousands of licenses were awarded was beyond anybody’s comprehension. But as a result, standard operating procedures have been noticeably absent. MetroMini drivers rarely have safety and convenience in mind when they hit the road, terrorizing other motorists. Worse still, enforcing discipline and rules — be it by police or by owner-operators of the buses — is practically non-existent.
Jokowi is now bringing the entire MetroMini operation under one roof, with 1,000 new buses owned and operated by a local state-owned company. Private ownership is still allowed, but licenses are awarded through open auction. The term of the license is 7 years and subject to constant monitoring and evaluation of performance. All buses will be run under the same best practices, from vehicle safety to the drivers’ conduct.
The MetroMini restructuring is a good example of avoiding regulatory arbitrage and putting the welfare of consumers above that of producers, in this case the old owners-operators.
Tackling the PPP fallacy
Another policy backwater is the drive to promote Public-Private Partnerships. It is true that given the structure of Indonesia’s fiscal structure today — with civil servants’ salaries and fuel subsidies being a heavy burden — there is only limited room for crucial infrastructure investment. Add to this the increasing emphasis on education (20 percent of the state budget), health care and other social security provisions, and you’ll see that PPP simply is a necessity for progress.
So far, however, Indonesia has had a dismal PPP record. Not only have the toll road concessions run into trouble, the water utility saga in Jakarta, in which foreign partners pulled out, is another example. Two aborted oil refinery projects in Java are also indicative of policy failures.
Infrastructure projects normally involve huge investment up front, and a payback period of 25 years and longer. Legal and regulatory certainty, therefore, is essential for structuring a project and making it attractive for potential investors. Our track record, in this case, is disheartening. Often the government simply did not honor its commitments as stipulated in a contract. The case of water utility in Jakarta is typical, where the promised hike of water prices as stipulated in the contract was simply ignored.
In another case, changes of government policy are affecting the economics of the projects. Many independent power producers are using the dollar as the currency for power bought by state-owned utility Perusahaan Listrik Negara. This makes perfect sense, since their investments were made in dollars and the input fuels (gas, coal etc.) are also priced in dollars. The enactment of a new law that stipulates that all domestic transaction shall be in rupiah will definitely change the power production landscape going forward.
The abandoned oil refinery projects point to another PPP fallacy. Finance Ministry bureaucrats, in this case, were myopically applying corporate finance considerations to evaluate this very strategic and important project economically. They assumed all investors are greedy at all times, and in so doing so they ignored entirely the economic analysis of the project. They focused more on profits and losses of the refinery than on the broader economic benefits of the project.
Given the above features and risks involved in infrastructure projects, we have to accept the fact that government support, in one form or another, is a necessary evil. Pretending that there will be PPP without government support and commitment is the greatest fallacy of all. The trick, as usual, is how to deal with this necessary evil through standardized government support, transparent processes of negotiation and adopting best practices for future project contingencies. Our track record in this area is disappointing, so we need a change in mindset.
Back to Idul Fitri. It is a moment for remembering, for reflection and for forgiving. And so it is time for a reality check on our policy challenges.
Let’s forgive, but not forget, that we have plenty of hard work ahead.
Farid Harianto is an economist and an adviser to Vice President Boediono. The views expressed here are his own.

The Jakarta Globe Editorial: 

Independence Day Is Also a Call to Action

The mark of success for any nation is how well its people are doing economically, socially and morally. All of these factors determine one’s living standards. And on all these fronts, Indonesians are better off today than they were 15 years ago.
As the nation celebrates its 68th birthday, it can stand tall in the community of nations. The country is a member of the G-20, a group of the largest economies in the world; it is the third-largest democracy in the world and a fast-growing market. Its people are among the happiest anywhere.
As President Susilo Bambang Yudhoyono notes, the country’s ethnic and religious diversity is one of its strengths. But for us to leverage this strength, we must promote greater tolerance and social harmony, which have been eroded in recent years.
Indonesia, many citizens think, is now free, and its people are also free. But looking around us, the country is still held in bondage by a host of problems and challenges. These include poverty, poor education, poor healthcare and lack of infrastructure.
Addressing and solving these problems will take leadership, commitment and resolve. It will require sacrifices and some tough decisions which might lead to short-term pain.
On Independence Day, many people also remember those who have fought and spilled blood for the country. The term “heroes” calls to mind those who fought and won independence for the nation nearly seven decades ago. But in truth, we need new kinds of heroes today: individuals who can take the lead in many diverse fields and have lives that younger Indonesians can look up to as role models.
Independence Day is a time to celebrate the nation’s achievements as much as it is a time to reflect on what lies ahead. We have come far as a nation, but we still have a long road ahead of us.

Independence demands political
and economic unity

Indonesians will celebrate their 68th Independence Day on Aug. 17. This year’s Independence Day commemoration is occurring close to the spirit of Idul Fitri festivities, which took place a week before.

We ought to be thankful for a mixture of two noteworthy matters: celebrating the gratitude of Idul Fitri and expressing a mature commemoration of the country’s freedom.

One of the chief stumbling blocks Indonesians are dealing with now is the discrepancy between political advancement and economic development. An Indonesian citizen knows that the unitary state of the Republic of Indonesia is politically acknowledged across the archipelago from Sabang to Merauke. This is a principal declaration that Indonesia’s political unity is uncompromised in people’s minds.

Yet the political accord becomes susceptible while the lion’s share of economic growth and prosperity is unequally distributed throughout the nation. Imbalances in infrastructure development, limited access to education and small- and medium-sized enterprises’ weak market penetration strategies across different regions in the country, to mention just a few, increasingly substantiate Indonesia’s obvious economic incongruity.

This challenging economic approach will slowly but surely put political stability at stake due to regional dissatisfaction.

In an attempt to contextualize the very essence of liberty, political and economic unity is then essential for subsequent rationales. First, it is the key to impartial development leading to central government legitimacy and widespread prosperity. It is public knowledge that national development has been and is still concentrating on Java. This island is densely populated on the strength of economic attraction, as the saying goes: “Where there is sugar, there are ants.”

While political integration is imposed nationwide by the government, economic development remains focused on certain areas. Prosperity is out of the reach by reason of economic injustice.

Additionally, such economic inequality is detrimental to demographic effects prompting constant rural to urban migration, movement of people from other parts of the country to Java, and a periphery to center exodus. Indonesia needs affirmative action on economic engineering that shifts economic improvement to peripheral areas and outside Java. Endeavors to empower regions for economic interest must crack down on comparative advantages engaging in financial and managerial initiatives. Otherwise, they are nothing more than politicians’ rhetoric.

Agriculture and creative industries could be remedies for regionally economic intensification. They might grow to the full providing local leadership is entrusted to entrepreneurs rather than to career bureaucrats and political appointees. The Success stories of Joko Widodo (former mayor of Surakarta in Central Java) and Amran Nur (former mayor of Sawahlunto in West Sumatra) are clear evidence of entrepreneurship-based local governance. They fathom that independence is not simply a matter of political freedom but is also inseparably associated with the public well-being.

Second, political and economic unity is considerably significant in terms of setting off a wave of nationalistic spirit. A massive crisis of confidence in the ruling authority is due to a strong emphasis on political slants when it comes to addressing public issues. This is definitely in contradiction to an economic approach. While the former defines people as being friend and foe, the latter creates multiple friends and less rivals.

Elites’ political acts have failed to awaken public patriotism on account of their interest in power sharing and political ceremonies, such as solemn official speeches and flag ceremonies. It does not mean, for example, that Indonesian citizens should no longer participate in flag ceremonies. People should not be judged as unpatriotic simply because they decide to enjoy the day doing other things. Each has his or her own ways of honoring Indonesia.

It is through the economic language of prosperity that a sense of patriotism turns into populism. Separatist movements in some areas — Maluku and Papua — are attributable to the government’s political suppression and economic exploitation, not just with the separatists’ being less knowledgeable about Indonesia’s historical unity. Populist nationalism, which is cushioned by economic prosperity, cannot fully count on political procedures owing to its narrow-mindedness and fragmented nature.

Third, political and economic integration conforms to Indonesia’s competitiveness. Based on the World Economic Forum’s (WEF) 2012-2013 report, Indonesia’s competitiveness ranking fell to 50 out of 144 countries. Bribery and red tape, which have been contributing factors to the decline, cannot be separated from the soaring trend of politicized government offices and service delivery. On the one side, politicization takes good-governance out of the country’s bureaucracy. On the other, it sees corporate culture exerting stress on economic yardsticks such as efficiency and effectiveness, which are central to enhancing productivity and igniting creativity.

One effort to increase the country’s competitiveness rests on the authority’s political will to apply good governance principles in the public sector. It is influential in paving the way for burgeoning competitiveness in social relations. The desire for competition should derive from a bottom-up approach so that productivity and creativity morph into the populist domain.

This is particularly true as future networking is largely swayed by people to people roles as opposed to government to government relations at the international level.

This is the core essence of liberty that Indonesian people aspire for. Long live the great Indonesia!

The writer is a lecturer at the Faculty of Cultural Sciences at Andalas University, Padan


Pluralism and regeneration:
Taufiq Kiemas’ political

Indonesians expressed their deepest condolences for the passing of Taufiq Kiemas, People’s Consultative Assembly (MPR) speaker and senior Indonesian Democratic Party of Struggle (PDI-P) politician, on Saturday.

 The state’s recognition of his services was given in his state funeral at the Kalibata Heroes Cemetery in South Jakarta on Sunday.

 Taufiq was known as a high caliber-politician. He proposed numerous ideas not simply for his party, but also for Indonesian politicians more widely. This country is in his debt for at least three of his ideas.

First, Taufiq was keen on preserving the four pillars of Indonesian nationhood, particularly for younger generations.

The state and the academic community accepted his ideas on the four pillars: Pancasila, the 1945 Constitution, the Bhineka Tunggal Ika (Unity in Diversity) national motto and the concept of the Unitary State of the Republic of Indonesia.

On many occasions, Taufiq said he expected youth to carry on the state’s bid to develop the country based on the four pillars.

His strong commitment to the four pillars attracted public esteem and earned him an honorary degree from Trisakti University.

The award was not only his academic achievement, but also the achievement of all MPR members. The MPR’s ongoing promotion of the four pillars, therefore, has firm foundation.

Under his leadership, each year the MPR supported events that renewed pledges of commitment to interfaith harmony.

To him, professing acceptance of Pancasila and pluralism had to be implemented in practice, not just with rhetoric.

Second, Taufiq was noncompromising concerning freedom of expression. He was of the opinion that expressing dissent was not taboo. Celebrating his 70th birthday, Taufiq openly criticized his wife, Megawati Soekarnoputri, former president and chair of the PDI-P, for being surrounded by sycophants.

He considered his criticism important for the party’s survival.

Taufiq was known for not being a “yes man” just to please his wife and the party. He was not ashamed of declaring that his wife’s popularity and electability rates were less impressive than those of Great Indonesia Movement (Gerindra) Party chairman Prabowo Subianto, Golkar Party chairman Aburizal Bakrie and President Susilo Bambang Yudhoyono.

It was no secret that Taufiq and Megawati often disagreed when they discussed politics. While Taufiq was said to be expressive and egalitarian, Megawati is regarded an introvert.

Their marriage never stopped Taufiq from criticizing his wife and party. His outspoken nature was strongly rooted in his endless fight to safeguard pluralism. He never treated people according to their religion, ethnicity, family
or group.

Third, Taufiq always advocated the rejuvenation in leadership of political parties. As a senior politician, he often stood out from other politicians of his age as he often talked about regeneration.

He once said the Presidency should be reserved for individuals from younger generations. That is why he was always locking horns with Megawati, telling the former president to drop her presidential ambitions and let someone younger run in 2014.

Since 2010, Taufiq said young blood would dominate the party structure for the next five years as part of its regeneration program and a plan to rebuild its image.

He believed it would be a disaster if the PDI-P was associated with the older generation.

Taufiq was acutely aware that regeneration was the biggest challenge facing the party in gaining the support of younger voters, since the public would see no improvement in the party if it was continually led by the same figure.

With his preference for political regeneration, Taufiq set the scene for young politicians to rise to secure spots on party tickets. His pioneering style sought to remove the shadows of older politicians who frequently resisted the political regeneration of their parties.

The writer is a lecturer in the faculty of cultural sciences at Andalas University, Padang.

Sufi Muslims Feel the Heat of Indonesia’s Rising Intolerance

The plight of the Al-Mujahadah Foundation madrassa in southern Aceh illustrates the perils of rising religious intolerance for Indonesia’s religious minorities. The school, a private institution that instructed dozens of students 8 to 25 years of age in the principles of Sufism — devotion to more mystical interpretations of Islam — lost its dormitory on July 5 due to an apparent arson attack. Less than a month later, on Aug. 1, the wall surrounding the school compound was destroyed in what the school authorities believe was an act of vandalism. Police are investigating the alleged arson attack, but say the school’s wall collapsed due to faulty construction.
Suspicions that the school has been singled out for harassment and intimidation aren’t unwarranted. In February, Aceh’s Ulama Consultative Council (MPU), a government entity that advises the government on Islamic affairs, demanded the school’s closure on the basis that it was “strange” and its teachings “false and misleading.”
The South Aceh regency government complied with that demand on March 4 by ordering all students to leave the facility. It also told the school’s top administrators not to receive guests in their homes as a way to derail possible home-schooling efforts. The same day, a mob of around 70 local Sunni villagers destroyed the school’s front gate while police stood by. Now the school sits empty.
The attack on the Sufi community in southern Aceh marks a sinister new phase in the ongoing campaign of intolerance by Islamist militant groups, such as the Islamic Defenders Front (FPI). The targets of that intolerance and acts of related violence have long been Christian groups, Shiite Muslims, and the Ahmadiyah, as well as members of native animist faiths.
Islamist militant groups seek to justify violence by espousing an interpretation of Sunni Islam that labels most non-Muslims as “infidels,” and Muslims who do not adhere to Sunni orthodoxy as “blasphemers.” The Jakarta-based Setara Institute, which monitors religious freedom in Indonesia, reported earlier this year that the number of reported incidents of violence related to religious intolerance jumped from 244 cases in 2011 to 264 in 2012. Now the Islamist militants seem to have a new target: Indonesia’s Sufi population.
It’s no mystery why Indonesia’s Islamist militants have been emboldened to extend their acts of harassment, intimidation and violence against the country’s Sufis

Sumatra has become ground zero for this new wave of intolerance and related violence against Sufis due to conservative Sunni clerics who have branded Sufi congregations as “heretical sects.” Unlike in other parts of Indonesia, Sumatra’s Sunni clerics are less constrained by the relatively tolerant Nahdlatul Ulama, Indonesia largest Muslim organization, which accommodates hundreds of Islamic tariqah (Sufi sects) under its umbrella, but which is relatively weak in Sumatra.
In September 2007, the Indonesian Ulama Council (MUI) in West Sumatra issued a fatwa, an Islamic legal ruling, against the local Al-Qiyadah Al-Islamiyah Sufi sect on the basis that they were “heretics.” Police responded to the fatwa by arresting the sect’s leaders. In May 2008, a West Sumatra court sentenced Dedi Priadi and Gerry Lufthy Yudistira, the sect’s father and son leaders, to three years’ imprisonment for “blasphemy.” Not to be outdone, in April 2011 Aceh’s governor, Irwandi Yusuf, issued a decree that banned 14 minority Islamic sects, including Sufi, Ahmadiyah and Shiite groupings.
Expect more such intolerance: in March 2012, the West Sumatra prosecutor’s office announced that the province hosted a total of “25 misleading sects” that merited official censure.
It’s no mystery why Indonesia’s Islamist militants have been emboldened to extend their acts of harassment, intimidation and violence against the country’s Sufis. Human Rights Watch issued a report in February documenting an alarming rise in religious intolerance and related acts of violence. The government of President Susilo Bambang Yudhoyono has proven unwilling to confront the perpetrators, enforce existing law and judicial decisions, and defend the rights to religious freedom embodied in Indonesia’s constitution and international law.
Indonesian government officials and security forces have often facilitated harassment and intimidation of religious minorities by militant Islamist groups or stood by while militants violently attacked religious minority communities. Such actions are in part made possible by discriminatory laws and regulations, including a blasphemy law that officially recognizes only six religions, and house of worship decrees that give local majority populations significant leverage over religious minority communities.
Indonesian government institutions have also played a role in the violation of the rights and freedoms of the country’s religious minorities. Those institutions, which include the Ministry of Religious Affairs, the Coordinating Board for Monitoring Mystical Beliefs in Society (Bakor Pakem) under the Attorney General’s Office, and the semi-official MUI, have eroded religious freedom by issuing decrees and fatwas against members of religious minorities and using their position of authority to press for the prosecution of “blasphemers.”
Human Rights Watch warned in February that a failure by Yudhoyono to act decisively against religious intolerance would foster a form of “toxic osmosis” that would only encourage Islamist militants to target new victims. Instead, Yudhoyono’s spokesman dismissed such concerns as “naive” and insisted that incidents of intolerance and violence by militant Islamist thugs against Indonesia’s religious minorities were merely expressions of “friction between groups.”
When I taught at the Ar Raniry Islamic Institute in Banda Aceh in the 1990s, I got to know some members of the religious minorities now under attack there. They deserve an end to the hate campaigns.
In May 2013, Yudhoyono promised that his government “would not tolerate any act of senseless violence committed by any group in the name of the religion.” Indonesia’s religious minorities, including the Sufis of Sumatra, need him to deliver on that promise.
Andreas Harsono is an Indonesia researcher at Human Rights Watch.

No comments: