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BOSTON:
When Abdurrahman Wahid became president in 1999, most
people expressed their optimistic hope about the
future of our country. Not long after that, the hope
vanished as we know the end of the story. Then when
Megawati replaced Wahid, the same hope arose again.
However, we did not realize that the circumstances
were very different than before.
And
to make matter worse, the decision and policy makers
are still sitting down in their comfortable chairs,
looking at their huge desk and office and thinking
random policy that she/he will implement to overcome
the current problems we are facing. So far, no clear
agenda from the government on how to tackle our real
problems and how to set the map and the road for our
future.
We
know we are experiencing serious problems of national
unity and the economy. The government’s foreign debt
has risen to nearly US$15 billion during the monetary
crisis, bringing the total public debt to nearly $70
billion. It creates not only a greater burden on
future generations, but undermines the willingness of
the international community to provide assistance to
Indonesia.
Private
foreign debt has soared to $69 billion while
negotiations with debtors, under a program supported
by the World Bank involving more than $23 billion in
outstanding foreign debts, achieved little. It has
only reached agreements in principal for around $3
billion. The road ahead is still arduous, especially
if the rupiah remains around the level of 10,000 to
the greenback.
The
bank restructuring program poses another serious
problem. Although it has made tremendous progress with
the closing of insolvent banks, our banking system is
still incapable of channeling credits into productive
investment in the real sector.
The
picture of the real economy is not promising either.
Foreign investment approvals fell by nearly 61
percent in 1998, from $33 billion in 1997 to $13
billion. The unemployment rate is now around 20
percent, the highest rate in the last 30 years.
Interest rates are locked in the range of 25 percent
to 30 percent, a range that is still too risky for the
business sector. The inflation rate of 25 percent is
high enough to disrupt household budgets.
The
threat of disintegration is mostly caused by the
mismanagement of economic development during New Order
era. A centralized economic policy conducted during
the era not only failed to elevate the nation’s
standard of living but also created serious regional
disparities. In 1997, for instance, per capita income
in Jakarta was nine-fold that of Southeast Sulawesi.
Problems of integration—of keeping the country
together as one—cannot be merely attributed to
social and cultural factors, but must take into
account the economic factor.
Consequently,
our task now is to put the economy back on track with
an average growth rate of 6 percent per year, an
inflation rate of less than 10 percent per year and so
forth. To
realize these sound aggregate economic numbers,
however, we should not neglect a more fundamental
aspect: the role of people in development.
The
most difficult thing in life is not to explain a
supremely complex problem, but to discover the
obvious. It took a Newton to question why an apple
falls downward rather than upward to discover the Law
of Gravity. It took a Keynes to discover that what is
considered economically rational behavior at the
disaggregate level may not be all that rational at the
aggregate level, and vice versa, which led him to
write his General Theory. After many decades of
development, we are rediscovering that people are both
the subject and the object of economic development.
This simple truth often becomes obscured because we
are used to talking in abstractions and aggregate
numbers.
When
we talk about subjects of economic development, we,
either as economists, businesspeople or bureaucrats,
often talk about investment capital, savings, exports,
imports and GDP. Human beings, who in fact are also
the planners of development, become a mere abstraction
and we tend to treat these as almost residual
elements.
The
lack of recognition given to humans as the object of
development is even more obvious. It is widely
conceived that the object of economic development is
to achieve high economic growth. A country with higher
growth is associated with a better standard of living.
Only
recently has the attention to humans become central in
economic development. It has accompanied the new
endogenous growth theory pioneered by Paul Romer from
the University of California at Berkeley, who
underlines the role of knowledge in growth, and Robert
Lucas, the 1995 Noble prize winner in economics, who
stresses the importance of human capital in
development. Yet, there has rarely been any consistent
and comprehensive analysis of how to integrate human
beings into development as both subject and object.
The
integration of people into development should bring
some fundamental implications in our economic plan.
Unlike traditional plans that place top
priority on capital investment, it would start with
human accounting. What is the profile of our human
resources: their education levels, skills, income
distribution and health conditions? What are the
urban-rural distribution, demographic transition and
level of human development? What are cultural and
social forces that motivate people in every province?
We
cannot plan for people if we start with imperfect
knowledge about them. Our human development data thus
far is often treated secondarily after financial and
aggregate economic data such as GDP growth, interest
rates, etc.
The
number of people living in poverty has jumped from 17
million in 1996 to 50 million in 1998, according to
data released by the Central Bureau of Statistics
(CBS) in 1998.
The
total population without access to health services,
safe water and sanitation are 39 million, 73 million
and 94 million respectively. Around 20 million adults
are illiterate and 9 million children under five are
malnourished, according to the 1999 volume of the
Human Development Report. Our labor force quality is
even more dismal. More than 65 percent of our labor
force acquire only an elementary school education or
less (CBS, 1998).
Having
recognized and realized our human resources profiles,
we then must express our development plan in terms of
basic human needs. This means that there will have to
be a clear exposition of the minimum targets for
average nutrition, education and health levels,
housing and transport. The basic needs then will have
to be built into production and consumption. In other
words, we should proceed from ends, the realization of
basic needs, to means, the attainment of sound
aggregate economic indicators, not the other way
around.
Consistent
with the targets, the development plan should also be
first evaluated in terms of human performance.
Therefore, a comprehensive set of social and human
indicators needs to be developed to monitor plan
progress. The
World Bank has been trying to capture this concept
since 1990 by composing a Human Development Index
which is based on three indicators.
First,
longevity, as measured by life expectancy at birth.
Second, educational attainment, as measured by
a combination of adult literary and combined primary,
secondary and tertiary enrollment ratios. Third,
standard of living, as measured by real GDP per
capita.
Our
HDI was ranked 76th in 1990 but dropped to
105 in 1997, slightly better than El Salvador at 107.
It implies that our human development indicators are
much worse that economic ones.
A
strategy for attaining sound economic indicators such
as a high economic growth and low inflation rate that
emphasizes people and their potential is the only way
to open opportunities for a better life. The great
Winston Churchill once declared “there is no finer
investment than putting milk in babies”. Similarly,
there is no better future for our country than putting
people first on the development plan.
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