(5 Mei, 2000)Gus Dur, Indonesia's fourth President, is not known as someone with a great interest in economics. But so was Indonesia's first President, Sukarno. Perhaps, Sukarno even despised economics. The third President, Soeharto, it is widely believed, was very keen in understanding economics, because it is about money. He found in Prof. Widjojo Nitisastro a mentor and did learn fast. The fourth President Habibie has his own theories about economics. He was proud to announce that his "zig zag" theory on interest rates was modeled without the help of any economist.
But Gus Dur is not uninterested about the economy. How could he|. In his position as President, he cannot turn his attention away from it. He inherited an economy that is in deep trouble, an economy with such a huge debt overhang, and in which any debt restructuring effort will prove to be very costly. Some modalities for restructuring are costlier than others, but they all require huge public resources, raising a serious problem of fiscal sustainability.
Yet, those are not the economic problems that Gus Dur is focusing on. Macroeconomics is an abstract construct. It is only felt when inflation, i.e. the increase in the general price level, gets out of control and begins to affect the purse of housewives. The intricacies of monetary policy are perhaps very boring to Gus Dur. While it is intricate, in monetary policy there is not much room for manipulation -- unlike in politics. Fiscal policy is equally boring. It would seem that Gus Dur would not see the urgency of why one should make "a lot of fuss" about it. If revenues are reduced or increased then expenditures should be reduced or increased accordingly. That is only logical. So, there is really no need to make a fuss about it, right?
I have talked to many people about Gus Dur's lack of interest in and understanding of monetary and fiscal policies. There is unanimity in their response. Yes, why should he bother about trying to understand monetary and fiscal policies. All he needs is to appreciate that responsible management of the economy requires prudent monetary and fiscal policies so that the economy continues to grow, that its distribution continues to improve, and that economic stability is maintained. In theory, Presidents' can have all the men and women to help him manage the economy. He will be the one to give them guidance on the basis of what they prepare for him: the various policy options and their implications. The President will decide on the most appropriate course of action, taking into consideration the wider social, political and national interests.
The problem is that Gus Dur did not have the freedom to choose his own men and women, at least not the core ones in his cabinet. Some have argued that this was a constraint that he himself has imposed by bringing in the other major political parties in forming the cabinet. He may have deemed this politically important despite the fact that there is no provision for a coalition government in the Constitution. In addition, as shown during the past few months, having representatives of those parties in the government do not guarantee that Gus Dur has the full support of the DPR in formulating and implementing his economic (and other) policies.
What he is left with is an incompetent cabinet, with each member going its own way. How, then, can this cabinet, and the economic team within it, prepare the groundwork for the President to lead in the economy? With this sort of a cabinet, it is no wonder that the President felt necessary to create other sources of advice. When inaugurating the National Economic Council (Dewan Ekonomi Nasional or DEN), Gus Dur stated in front of the media that he needs DEN in view of the fact that his cabinet was the product of horse trading. Yet, DEN is to give a "second" opinion. In the many months since, there has been no clear "first" opinion to be dealt with in the first place. Gus Dur also established another council, the National Business Development Council (Dewan Pengembangan Usaha Nasional or DPUN), which was immediately criticized by the coordinating minister for the economy, who is known to dislike the conglomerates. Both DEN and DPUN are only sources of advice. They cannot and should not be involved in the execution of policies.
Gus Dur goes high profile in terms of seeking advice. In addition to DEN and DPUN, he has invited a number of prominent leaders and individuals from different countries to make up an international advisory council of sorts. This includes Lee Kuan Yew, Paul Volcker, Henry Kissinger and George Soros. But there is also a limit to what they can do. It has been reported that Paul Volcker, after undertaking a brief visit to Indonesia, was not sure how he can assist Indonesia with economic advice. He is of the opinion that the President is a charismatic and popular leader, but below him there is no leadership. He understands why Gus Dur had to bring in exponents from the different parties into his cabinet, but he believes that the economic team should have come from one coherent group in order to function well. This is, of course, not a full-proof recipe. And perhaps the problem is much more complex than this.
Gus Dur appears to have underestimated the importance of a cabinet. Indeed, many observers find that he is too detached from his cabinet. When forming the cabinet, so it is rumored, he rejected to include a few names by arguing that they are "too good" for being in his cabinet; instead, they should be reserved for heading the various agencies, which Gus Dur believes are more important. Again, there is something very valid in the wisdom about the importance of such agencies as the Central Bank, IBRA, Pertamina and other state owned enterprises. But such agencies (perhaps with the exception of the Central Bank) are still not independent of the cabinet, i.e. the minister of finance and other line ministries. This means, the cabinet can still do a lot of damage.
Gus Dur is stuck with his cabinet. This has been the reason for establishing yet another institution, the team of assistants to assist the coordinating minister for the economy. It is "a strange design" because it needs the President to establish this for one of his ministers. The team is of a high profile nature as it is headed by Prof. Widjojo Nitisastro, the economic architect of Soeharto's New Order and assisted among others by two brilliant young economists, Sri Mulyani Indrawati and Faisal Basri. The team could have been more effective if it were to be placed within the President's office. It is possible that the President did not want to give the impression that he wants to take over the control of managing the economy from the coordinating minister. Yet in effect that is what happens, because substantially, not formally, the team of assistants works for and on behalf of the President because it was set up by the President. What they can do, at the least, is to control the damage. Their performance, should thus be judged in this light.
What then will become of the Indonesian economy? An IMF-supported program is in place. It is a rather ambitious program, but it includes all the major measures that need to be taken to revive the economy. Prof. Widjojo's team is entrusted with making sure that this program is being implemented.
Gus Dur himself had some input into this program, known popularly as the Letter of Intent (LOI). While the program is basically a continuation of the previous ones, Gus Dur has insisted that issues of agricultural development, SMEs (small and medium enterprises) and human resources development be made an integral part of the program.
Economics, in Gus Dur's view, is about the small people, agriculture, and cooperatives. This view is clearly reflected in the collection of his columns in TEMPO magazine over the years. Of the hundreds or so of his columns, mostly written in the 1970s and 1980s, only six dealt with economic issues. These involve issues of farming, agroindustry, appropriate technology, poverty, and cooperatives. They reveal that the kind of economics that he read was that of John Kenneth Galbraith. He also cited several studies on poverty.
Economics, in Gus Dur's view, is something concrete and deals with real, visible issues such as poverty. He also understands the need to revive the real, production sector. In fact, his first economic initiative was meant to revive the economy by bringing in new investments, especially from abroad. He believes that two sources are particularly critical. First is the return of Sino-Indonesian capital that have left the country following the May 1998 riots. It is still unclear how large this is, since the figures often quoted have no basis what so ever. Be that as it may, two concrete, but simplistic, steps were taken. One is to have Kwik Kian Gie, a Sino-Indonesian, as the coordinating minister for the economy. Unfortunately, Kwik never regarded himself as representing the Sino-Indonesian community. The other step is to improve relations with China. It is also not clear how this relationship will affect the behavior of Sino-Indonesian business or that of the "overseas Chinese" in Southeast Asia.
The second source is that of multilateral institutions, IMF and the World Bank, in particular. He believes, not totally incorrectly, that the United States has a great influence on these international financial institutions (IFIs). Speaking of the United States economically, his attention turns towards Wall Street. Again, perhaps viewing things too simplistically, he equates Wall Street with the Jews. Hence, his move to open relations with Israel. In addition, he also thought that George Soros would represent the Jews. Soros is said to have objected to this stereotyping and was puzzled why Gus Dur wasted his time to talk about Zionism when they met in Davos early this year.
These are the two aspects of Gus Dur's economic policy thus far. They deal with concrete issues. Sometimes, he views things too concretely. Having assumed the Presidency, Gus Dur needs to learn economics, perhaps just the basics. Failing to do so, he could easily fall into the trap of adopting populist policies. Unfortunately, he already has done so when deciding on postponing the reduction of fuel subsidies. Yet, it is still not too late. Gus Dur is smart and intelligent enough to appreciate economics and the working of an economy.
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