Overseas Think Tank for Indonesia

By Beni Bevly

It’s my tendency to get to know the topic more from the seminar or discussion that I am going to attend. The night before attending the discussion in San Francisco, CA, USA with Dorodjatun Kuntjoro-Jakti (MA ‘66 Public Admin and PhD ‘81 Political Science UC Berkeley Alumnus) who was a Professor of Economics at the University of Indonesia, Former Coordinating Minister for Economic Affairs, and the 14th former Indonesian Ambassador to the United States, I conducted a brief research on current Indonesia economy. There were two findings that’s quite interesting. First, about the positive progress of Indonesia economy represented by statistics economy growth, and second, it shows the decrease of wealth, increase of poverty and unemployment rate among Indonesian people. How could it be? I thought the discussion with Dr. Kuntjoro-Jakri would help me to understand this issue better.

In that seminar, he presented the statistic data regarding IV quarter of 2007 Indonesia economy improvement and a new tendency that was happening in Indonesia economy which involved private equity that had been buying undervalue, under-manged and high risk companies, including public companies. He called it P2P (Private Equity to Public) business. All the data he presented was so impressive and very promising. In term of economic growth, he mentioned from 1998 with -13.8% of GDP, has been improving persistently up to 6.3% in 2007 and would be 6.5-7% in 2008. In term of investment, it raised to 145% from 2006. He also mentioned that inflation was under control, which was around 6% in 2007-2009. And there were many other information and statistics to support the argument that Indonesia economy was already in the right track.

Unfortunately, I did not get the answer for my contradictory findings, which were the positive progress of Indonesia economy represented by statistics economy growth on one side, and showed the decrease of wealth, increase of poverty and unemployment rate among Indonesian people on the other side. In fact, my expectation on this seminar was not too high considering that Dr. Kuntjoro-Jakti had different reputation compared to his seniors at the University of California Berkeley who were known as Berkeley Mafia. He was considered as an populist scholar and a supporter of the rights and power of the people. Below is the statement I quoted from Kompas:

“Akan tetapi, sebetulnya posisi yang diambil Dorodjatun itu tidaklah aneh, bahkan mungkin dia memang tidak pas untuk dimasukkan ke dalam kelompok “epistemis liberal”. Meskipun dia dikenal sebagai generasi terakhir Mafia Berkeley, dia sebetulnya sudah menyimpang dari jalur liberalisme ekonomi yang dianut kelompok teknokrat tersebut.

Dalam sebuah diskusi Senat Mahasiswa di FISIP UI, dia secara bercanda mengatakan bahwa Pemerintah Indonesia waktu itu berhenti mengirimkan ekonom mudanya ke Berkeley setelah melihat hasil dari generasi terakhirnya (maksudnya dirinya sendiri) menjadi melenceng. Maka, kalau dulu Hadi Soesastro mengajar pengantar ekonomi di FISIP UI memakai textbook Samuelson, Dorodjatun lebih menyukai textbook Todaro.”

He even did not refer to Samuelson’s Economic text book when he taught at the college, instead he used Todaro’s.

As we know, Paul Anthony Samuelson (born May 15, 1915) is an American neoclassical economist who wrote Economics. Samuelson’s text was first published in 1948, and it immediately became the authority for the principles of economics courses. The book continues to be the standard-bearer for principles courses, and this revision continues to be a clear, accurate, and interesting introduction to modern economics principles. Bill Nordhaus is now the primary author of this text, and he has revised the book to be as current and relevant as ever.

Whereas, Michael P. Todaro is an American economist and is a pioneer in the field of transportation economics. His Economic Development in the Third World is a book to aim at undergraduates and focuses on development problems such as poverty, inequality and unemployment. In order to help students grasp important economic concepts, emphasis is placed on explaining them in the context of the actual problems confronting Third World policy makers.

However, there is always the other side of a coin. An article which discusses his economy policy on Pikiran Rakyat news paper mentions:

“Sementara itu ketua Tim Pemantau Kebijakan Publik P3R Ahmad Iskandar menambahkan, semua kebijakan ekonomi yang dikeluarkan tim Menko Ekuin Kabinet Gotong Royong (Dorodjatun Kuncoro Jakti cs) cenderung hanya meniru konsepsi kebijakan yang dibuat oleh arsitek ekonomi Orde Baru yang lebih mementingkan kepentingan pihak asing ketimbang kepentingan rakyat. ”Kami menyayangkan kinerja Pak Dorodjatun yang memperlihatkan dirinya tidak lebih hanya kelanjutan dari ”mafia berkeley” generasi kedua,” ungkap Iskandar.

Ia menambahkan, krisis ekonomi nasional yang sudah berlangsung hampir 5 tahun tidak bisa dilepaskan dari kesalahan konsepsi, policy, dan strategi pembangunan yang dibuat arsitek ekonomi Orde Baru yang beken disebut Mafia Berkeley (Widjojo Nitisastro, Ali Wardhana, Emil Salim, M. Sadli, dan Subroto).”

Basically, this article discusses that Dr. Kuntjoro-Jakti’s performance as Coordinating Minister for Economic Affairs was the continuation from Berkeley Mafia who prioritized foreigners’ vested interest and set aside people’s interest.

Despite of the above arguments, from February 2005 to March 2006, the poverty rate increased from 16.0 to 17.8 percent. There are 39 million people, 4 million more than in 2005, who were getting poorer. There are two main elements that caused the increasing of poverty rate. First, the increase of fuel price. Once, it increased 126% in 2005, and the majority of the people still feel the impact until today. Second the increase of rice price. Between February 2005 and March 2006 the rice price increased double. While the people wages barely increased. The number of poor Indonesians would have soared even more, to 51 million people according to the statistics office.

According to the CIA-The World Fact Book, the unemployment rate had been increasing steadily since 2004 that stared with 8.70 %, becoming 9.20% in 2005, 11.80% in 2006, and it was estimated 12.50% in 2007. There are two main elements that cause the unemployment keeps increasing in Indonesia. First, the economic development does not reach the rural areas. From time to time, these areas are far left behind. Many of them are getting poorer. People who live in these areas no longer can rely on what they have been doing to support their life. As a result, a lot of them seek for jobs in urban areas such as Jakarta, Surabaya and other big cities. Many of them become jobless and they even create more problems in big cities, such as increasing crime rate.

Second, there is lack of trained human resources. According to a recent international survey on quality of human resources, Indonesia ranked 59th among 60 developing countries surveyed, just below Vietnam. From 106 million-strong work force, 18% have never attended school, 36% are elementary school graduates and dropouts, 20% are junior high school graduates, 21% are senior high school graduates and less than 6 percent are academy and university graduates (Jakarta Post, retrieved on November 12, 2007). The industries have offered numerous job opportunities but they cannot be filled because of the absence people or lack of competence.

What these tell us? Even though Indonesian GDP growth has persistently improved since 1999, however, first, the economy development does not support agricultural development and its infrastructure, especially in cultivating rice or paddy properly. Second, the development only concentrates mostly in big cities. Third, there is no real effort and political will to establish effective and efficient power/energy plant and refinery and/or look for fossil fuel substitution. Fourth, the education system/program does not match to the requirement of the labor market. Because of these four elements, poverty and unemployment remain increase, regardless how much the statistics show that Indonesia economy improves.

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*Beni Bevly holds BA in Political Science, MBA in Marketing, and is a DBA (Doctor of Business Administration) candidate. He is the founder of Overseas Think Tank for Indonesia.