Saturday, July 30, 2011

Volume 3 Issue 31: Two-Cent Economics

A Real Economic Transformation Program

This is what a real economic transformation program looks like. The article was written by Sri Mulyani Indrawati, now the Managing Directer of the World Bank, and also a former finance minister of Indonesia. By the way, she does not need a title like "Datuk", or "Datuk Seri", or "Tan Sri" in front of her name. She is "JUST" a graduate from the University of Indonesia, with a masters and doctorate from the University of Illinois at Urbana-Champaign.

In the article, she talks about the transition phase of an economy which is trying to change itself. She gives the tip of the iceberg of Indonesia's successful transformation from Suharto's autocratic rule to the current administration under President Susilo Bambang Yudhoyono.

Recently, I also shared an article about the rise of Indonesia as an economic powerhouse. From Sri Mulyani's article, you can see that Indonesia focused a lot more on the "doing" than the "talking", which is what Malaysia has been sending Idris Jala out to do. Just as an example:
In Indonesia, we signed a hundred laws in less than 18 months, covering everything from media freedom to elections, corruption, decentralization, and anti-trust rules. We ratified new public-finance legislation and ensured the independence of the country’s central bank. 
New leaders must also expect and manage setbacks. In post-revolutionary times, expectations are high, and the obstacles to meeting them are enormous. I know from personal experience that we did not always have the luxury of getting the best outcomes. We had to compromise and settle for the best possible results. 
Security threats are among the most serious setbacks in transitions. Nationalistic sentiment is strong, and politicians and interest groups can exploit it. Often, the security forces are holdovers from the old regime, and there is no independent judicial system. Reforms will take time, and the old bureaucracies may not be able to implement them
In Indonesia, we used various innovations to work around such dilemmas. For example, we appointed an independent judge to take over the bankruptcy and corruption courts, because career judges were too tainted. Likewise, when we started cash-for-work programs as part of our pro-poor agenda, we asked communities to run these initiatives.
This is what real reforms should look like. Not just talking and talking and talking but no actual doing. I highly recommend that you read the whole article.