Bernardo M. Villegas
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Rebalancing Strategy
published: Mar 31, 2017



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Can We Do An Indonesia?

          In the last century, there was such a shortage of business managers in Indonesia that Filipino executives, especially in finance and marketing, were ubiquitous in the largest Indonesian conglomerates.  SGV practically built the accounting profession in Jakarta.  Today, there are still a good number of Filipinos in top management positions in Indonesia.  This year, however, Indonesia seems to have accomplished a political feat that we are still dreaming of:  elect to the highest position of the land a self-effacing, small-time provincial mayor with no ties to the political elite.  As an editorial in the Financial Times stated, “The election of Joko Widodo as president of Indonesia marks a potentially positive development for the world’s fourth most populous nation….Mr. Widodo’s style of leadership also carries promise.  As mayor of Solo, a city in central Java, the former furniture exporter made his name as an honest leader with a common touch and a habit of getting things done.  He extended that reparation in his brief stint as governor of Jakarta where he improved social services, unblocked long-delayed transport projects, and purged incompetent bureaucrats.”  We had an equivalent leader, Jesse Robredo, but God had different plans for him.  It may be hoping against hope, but can we find someone like him before the elections in 2016?

          Not that “Jokowi” (his nickname in Indonesia) is facing a bed of roses.  He has to learn quickly the art of national politics.  The FT editorial enumerated the challenges facing him:    “The odds are stacked against him.  His first problem is political.  In winning the election, he had made an enemy of Prabowo Subianto, the former general whom he defeated in the presidential race.  Mr. Prabowo, who has strong links to the military and business establishment that has ruled since independence, has not forgiven Mr. Widodo his victory.  He will spend the next five years seeking to undermine the new president.”  I find more optimism, however, among people in the business community and the academe whom I have interviewed.  They opine that the combination of sincerity, integrity, managerial competence and common sense possessed by their new President will go a long way in getting the support of the masses and the thought leaders of the country.  He has also surrounded himself with a sufficient number of very competent technocrats, setting a record by appointing 8 female ministers in his Cabinet, heralded by a local columnist named Stefan Handoyo as a first in the history of modern democracy:  “Not even in the U.S., Europe or the Philippines have there been more women in top government positions than what we have in Indonesia.”  He then added the observation that this decision of President Jokowi takes on greater significance if one considers that Indonesia is a country with the biggest Muslim population in the world.  Islam, whether rightly or wrongly, is often viewed as anti-women.

          I would like to focus especially on the appointment of Dr. Bambang P.S. Brodjonegoro, a prominent economist, as Minister of Finance.  I had the opportunity to read a presentation made by Dr. Bambang to the members of the Financial Club of Jakarta when he was still the Vice Minister of Finance under the past Administration of President SBY.  The vision he presented for the Indonesian economy in the next ten to twenty years could also inspire the economic team of the Government that we will elect in 2016, even if we are not fortunate enough to get a President like Jokowi.  The least we can ask for is an economic team that is better coordinated with a clear vision and a passion for execution, which we find lacking in some of our national leaders today.

          Dr. Bambang wants to address from the very beginning the danger of Indonesia falling into the Middle Income Trap, in which the Philippines has been  for at least the last two decades.  In his presentation to the Financial Club, the new Minister of Finance addresses head on the cause of a growth slowdown:  a productivity slowdown, which occurs because low-cost labor and adaptation of foreign technology which are key factors that generate high growth during lower level of development, disappear at the middle-income level.  Once a country reaches middle income levels (anywhere from $2,000 to $7, 250 per capita annually), there is less supply of underemployed rural workers, causing wages to rise, and eroding competitiveness.  The country gets stuck at these levels of income almost indefinitely because it is unable to compete with low-wage economies in manufactured exports and unable to compete with advanced economies in high-skilled innovations.

          Dr. Bambang provides a road map for President Jokowi, who as Governor of Jakarta, a city of 20 million inhabitants, demonstrated the ability to transform a vision into concrete reality.  To strengthen the domestic economy, the highest priority must be assigned to improving the quality of human capital; improving the productivity of every economic sector; improving product competitiveness in both international and domestic markets; and  achieving structural transformation from traditional and low value added sector to the higher-value added ones.  To increase production capacity and enhance the supply side, a higher rate of investment must be achieved.  This is made possible by improving infrastructure availability and distribution through all regions (electricity, road, seaport, railways, etc.); encouraging and promoting research and development and innovation; improving the financial sector support and linkage to the real sector.  To attain inclusive growth through poverty reduction and improvement of income distribution, there must   be greater access to quality education and health services among the poorest of the poor; small-and-medium-scale enterprises must have access to more financial resources; and the national social safety net system must be  expanded.       These may sound as pure motherhood statements.  Indonesia, however, has a better track record than the Philippines in  operationalising their strategic plans.  Even during the rather imperfect government under the authoritarian leader President Suharto, who was removed from office in 1998, poverty incidence was reduced to less than 10 percent of the population (compared to 25 per cent in the Philippines) because of a greater focus on farm-to-market roads, irrigation systems and rural infrastructures than in the Philippines  More than five years before our own anti-corruption campaign under the present Administration, the Indonesians had successfully prosecuted corrupt top officials from the Government and private sector, prompting credit rating agencies to give Indonesia investment grade several years before the Philippines.  There is no reason why President Jokowi cannot accomplish even more during his term.   Indonesia surpassed the Philippines in per capita income more than five years ago.  Under an honest and competent President Jokowi, Indonesia may continue to outperform the Philippines.  The next President of the Philippines has his job cut out for him:  learn from the recent experiences of Indonesia and closely observe what President Jokowi will be doing.   For comments, my email address is bernardo.villegas@uap.asia