B. Herry-Priyono, Jakarta
Affliction is the mother of inflated expectation. When reality fails to match expectation, it has to pay the toll of disenchantment. Perhaps this is what happened in the lukewarm reception of the long-awaited package of new economic policy reforms unveiled on June 12.
There are four areas of concern addressed by the package -- the financial, investment, infrastructure development and small-and-medium enterprises (SMEs) sectors. In all this, the package is expected to inject a dose of incentives into the current inertia. That is laudable.
In the investment sector, for instance, the time required for obtaining business licenses will be reduced from the current 97 days to 25 days.
In the SMEs sector, easier access to bank loans, land certification for collateral and to the services of local financial consultants is expected to boost the growth of these enterprises.
As has been regularly rehearsed, all this is supposed to accelerate growth so as to reduce unemployment and poverty.
The virtue of the new package lies not in any major policy breakthroughs -- let alone in making a more direct approach to poverty reduction -- but rather in making a statement of intent to break the bureaucratic bottleneck rampant in the Indonesian economy. This is laudable, even if it is too incremental to bring any significant impacts. But to say that the new package is too incremental to have a significant impact is a form of platitude.
In policy-making circles there is a peculiar tendency for what may be called ""roundabout logic"". It is a policy approach whose logic of problem solving, instead of going directly to the target, contains a string of layered-upon-layered indirect measures.
Of course, the issue is not as simple as it first appears. Policy mandarins are doing the work of societal coordination. Sometimes they need to pass policies through roundabout routes by treating society as a vast hydraulic network; i.e., to change something at one end of the network by changing things at the other end.
But in urgent matters such as SMEs and poverty, this ""roundabout logic"" is likely to fail. Why? The indirectness involved in the roundabout route makes the initial agenda easily lost in the morass of indirectness. If the new package is intended to inject a dose of incentives, it is likely to fail not because the incentives have turned into disincentives, but because the incentives are lost in the morass of indirectness. Bureaucratic bottlenecks are surely part of the problem, but by no means the crucial factor.
The central issue seems to have less to do with bureaucratic bottlenecks than with a yawning disconnect between the type of economy envisioned in the new package and the type of economy required to spur SMEs and address poverty problems. Unless based on a complete misreading, it seems clear that the new policy package is predicated upon a dogged intent to bring the poor and SMEs as quickly as possible into the ambit of the modern and cosmopolitan economy.
I, as much as you perhaps, would surely be delighted to see my fellow citizens become active participants in the haut monde of modern and suave economy, rather than merely being passive consumers. But things start to bog down when we consider the initial conditions from which the new policy package must start. To begin with, the most elementary problem is the fact that there are 108.78 million Indonesians living on less than US$2 a day. This is almost half of the Indonesian population.
What has this to do with the new policy package? Except that we are guided by myopia, this also means that any attempts at poverty reduction must start from a very low base, be it low purchasing power, low capital, low productivity or low economic network.
With regard to the issue of the SMEs sector, the picture is even starker. The term ""small and medium enterprises"" may sound innocent, but it has blotted out a vast continent of ""micro enterprises"" that constitute the biggest number of economic units in Indonesia. There are approximately 41.8 million micro and 588,000 small enterprises as compared to 62,000 medium and 2,000 big or giant enterprises. This means, micro and small enterprises comprise a combined 99.84 percent of the economic units in Indonesia.
While providing business confidence for big or giant investors remains imperative, any policy to spur the growth of SMEs that conceives its agenda from the outlook of the haut monde economy is likely to flounder. It is precarious to say the least, because the future threatens to prove the good-willed policy wrong.
It may be true that the future belongs to the integration of this vast continent of micro and small enterprises into the ambit of the modern economy. But to do so by imposing the policy outlook of the latter upon the former is a recipe for more inertia.
This may explain why even after a series of economic reform packages, no significant outcome has taken place in the micro-and-small-enterprises sector. So, if they are to be gradually integrated into the modern economy, let it happen through a trial-and-error process rather than through policy wishful thinking.
But how alien is the haut monde of modern economic outlook to the denizens of the micro and small enterprises? A few weeks ago, I had some visitors from Perkumpulan Suara Ibu Peduli, or the Voice of Concerned Mothers Association. Founded at the height of the financial crisis in 1998, it has grown into a network of grassroots movements, of which the most important is a loan cooperative for micro and small scale entrepreneurship carried out in the style of Muhammad Yunus' micro finance. It is now ""responsible"" for the economic survival of about 2,000 poor families in Greater Jakarta.
They came to inquire about some possible collaboration to obtain soft loans or to grant the expansion of their credit coops, as they have been in high demand in many poor areas in Bekasi. What was revealing is, they simply would not go to modern and conventional banks.
Even if they wished to make savings in any of these banks, they could start only from a meager amount of Rp 1.5 million ($160). And they can't afford this, as the administrative costs would deplete the meager amount they wished to start with.
All this may sound mundane, but it embarrassingly threatens to prove that the agenda of the new economic reform package will be lost in the morass of indirectness.
The writer, a lecturer in the Postgraduate Program at The Driyarkara School of Philosophy, Jakarta, holds a PhD from The London School of Economics.
