Confronting Conformity: Reflection on Success and Failed Story
By Rully Prassetya (Feb 14th 2013)
“The reward for conformity is that everyone likes you, except yourself”
History always remembers people of organization which were brave enough to challenge conformity. The founding fathers of Indonesia, India, Malaysia, Egypt and many others are the people who brave enough to challenge European colonization in the 20th century.
There are several common characteristics among these reformists. First, they have the ‘youth’ spirit. Youth spirit does not necessarily means that they are young; but they have the spirit of young people, that is rebuttal against blind-conformity. Second, they are organized. Most, if not all, independence movement in the 20th century were started as youth organization, whether as social, educational, or political organization. This organized movement had multiplied their power. Third, they have strong-value based movement. For independence activist, it was the notion that “colonization is an act of abuse against human rights” which make the movement is ever lasting.
The rest of the essay will be divided in four parts. First is the theory of conformity. Second is success story on confronting against conformity. Third is failed story on confronting against conformity. Last part is the conclusion.
Theory of conformity
Conformity is big topic in psychology and marketing science. In psychology theory, individuals are believed to do conformity to its social group. In marketing theory, it is conformity which drives for consumerism (Lascu & Zinkhan, 1999), or in economics it is called Bandwagon effect.
There are two sources or causes for conformity, that is inside and outside, which leads to two types of conformity. First is inability to confront the authority or super power (outside-caused conformity) whether formal or informal authority; while second is inability to confront our own previous behaviour or experience (inside-caused conformity). The first is very common in fight for independence as well as in international relation area. The second is usually what a principle based people are able to overcome inside themselves.
In international relation, poor countries tend to seek conformity from more affluent countries. States with relatively less capable legislatures, less professional legal systems, and less conservative are also more likely will seek cooperation and conformity (Nice, 1984). Besides that, the coercive and referent power are the most appropriate explanation for conformity (Warren, 1968). Furthermore, the perceived threat should also exist to make sure conformity exist (Feldman, 2003).
The question which is worth asking is what the key success factors in confronting conformity are. In answering this question, the following section will look for success and failed story on confronting the conformity.
Justice and Prosperous Party (PKS) in Indonesia: Success Story for Confronting Conformity
PKS is the largest Islamic party in Indonesia. It was started as a small party, named Justice Party, established by young people in 1998, following the fall of Soeharto regime. The founding fathers and its movement were instrumental in removing the authoritarian Soeharto after being in power for 32 years. After the first general election in 1999, the party was dissolved and changed to Justice and Prosperous Party because it did not pass the minimum threshold. In 2004 it gained quite considerable amount of voting share. Finally, in 2009 general election it emerged as the biggest Islamic party in Indonesia, gaining more votes than the long established two other Islamic parties.
What makes Justice and Prosperous party unique is not its Islamic branding but the brand that it commits to eradicate corruption and also the image of ‘young party’ as most of its member are educated-young Muslim. Its tagline is clean and professional which stress its stance against corruption and commitment for public service. It has to be noted that PKS has been doing this in the midst of strong corruption environment in Indonesia’s political system.
Among other parties, PKS is among the few parties which have not been accused for corruption scandal. In short, PKS has been success in creating a clean and professional party, which stimulate for a better political environment. It is consistent with one of its main goals, which are to reform the political, governance, bureaucracy, justice, and military in Indonesia.
There are several key success factors in PKS’s experience from confronting conformity. First is its strong cadre system. It is the cadre-based system which makes it quite different from other parties. In other parties, to be a candidate for parliament member or local government, one only need to be rich, thus able to ‘buy’ vote. In PKS system, any parliament member or local government leader candidates should be its cadre. Second is the strong value or idealism that the party brings. As noted previously, PKS has been very consistent in advocating clean and professional government. Third is the strong professionalism that the party brings. Despite its young age, it is among the few parties which have comprehensive platform or strategic goals for Indonesia. It shows that the party has a solid intellectual and ideological foundation on where it wants Indonesia to go.
Most, if not all, of ministries or provinces and cities which are led by PKS cadre are among the top performing ministries or local governments. Currently, under the coalition government, there are around three ministers which come from PKS. Based on evaluation from presidential delivery unit in 2012, the three ministries’ achievement are higher than other ministries. The three governors out of 33 provinces which come from PKS are also among the governors which have received more awards compared to other governors. This facts shows the party has been able to transform the governance in Indonesia’s politics.
In conclusion, PKS is an example of how an organization can confront the conformity and commit for idealism.
Countries Conformity to US’s Unconditional Protection to Israel’s Colonization: Failed Story on Confronting the Conformity
United States has been very supportive since 1967 to anything that Israel has done in Middle East, including the illegal settlement that it has been relentlessly built. This is mainly due to US private sector interest, Israel lobby in the US, and lack of US citizen understanding on what actually happen in Palestine-Israel conflict (Rabbani, 2012).
International community has also been silent regarding Israel occupation in Gaza and the expanding illegal settlement. The Palestinian issue has been reduced from Israel colonization to humanitarian issue (Roy, 2012). Palestinian bid for UN membership previously was rejected because US’s objection towards this unilateralism move by Palestine; nonetheless, US ignore that the power differential has been large between Palestine and Israel (Gordon & Cohen, 2012).
President Obama has made it very clear in front of UN general assembly that “America’s commitment to Israel’s security is unshakeable, America’s friendship with Israel is enduring, and that Israel must be recognized” (Obama, 2012). Yet it ignored the very fact of colonization that Israel have done. This type of ignorance and conformity from other world leaders are the very basic things to be changed. Israel has been expanding the illegal settlement for around 45 years (since 1967) and has killed thousands of Palestinian without anyone has held Israel accountable.
Palestinian finally got their bid for an upgrade status in the UN. Its status was upgraded to non-member observer state. There was 138 countries voting in favour of this upgrade, nine countries vote against it and 41 other abstain. Even though this showed a major changes since several attempt for this membership has always been failed, still we can observe several countries, tried to keep their conformity to US’s position. Nonetheless, we saw a change, where countries who previously always conformed US in this issue (could be called as US allies, such as France, Italy, and others) have voted in favour for the bid. Nonetheless, the very fact that further international supports for the colonized Palestine has not been taken clearly shows the negative conformity that countries around the world are doing.
In short, the fact that many countries are following US action to not supporting Palestine and approving Israel brutal aggression and colonization in Palestine is the most tragic form of conformity since the World War II.
As quoted previously, “The reward for conformity is that everyone likes you, except yourself”. The winner is always the one who is not happy with the status quo. It is a progressive notion; the spirit to be better and to change the status quo. The rewards for confronting against conformity might not always be good or might not always be received today, maybe later. The independence fighter in Aceh of Indonesia’s fight for independence in 1880’s might not be felt by the fighter. But, the satisfaction cause the bravery to confront the conformity is ever lasting.
Individual and countries around the world should realize that blind conformity, by ignoring their idealism is the biggest mistake that they have ever taken.
Feldman, S., 2003. Enforcing Social Conformity: A Theory of Authoritarianism. Political Psycology, 24(1), pp. 41-74.
Gordon, N. & Cohen, Y., 2012. Western Interest, Israeli Unilateralism, and the Two-State Solution. Journal of Palestine Studies, 41(3), pp. 6-18.
Lascu, D.-N. & Zinkhan, G., 1999. Consumer Conformity: review and Applications for Marketing Theory and Practice. Journal of Marketing Theory and Practice, 7(3), pp. 1-12.
Nice, D. C., 1984. Cooperation & Conformity among the States. Polity, 16(3), pp. 494-505.
Obama, B., 2012. US President Remarks at the AIPAC Conference 2012. Journal of Palestine Studies, pp. 198-201.
Rabbani, M., 2012. Reflection on a Lifetime of Engagement with Zionism, the Palestine Question, and American Empire: An Interview with Noam Chomsky. Journal of Palestine Studies, 41(3), pp. 92-120.
Roy, S., 2012. Reconceptualizing the Israeli-Palestinian Conflicr: Key Paradigm Shifts. Journal of Palestine Studies, 41(3), pp. 71-91.
Warren, D. L., 1968. Power, Visibility, and Conformity in Formal Organizations. American Sociological Review, 33(6), pp. 951-970.
Japan’s ODA Policy
By Rully Prassetya (January 31st 2013)
Official Development Assistance (ODA) is defined by OECD as flow of official financing the main objectives of which are economic development and welfare of developing countries; and which are concessional in character. Japan was the largest ODA donor worldwide from 1991 until 2000 when overtaken by US until now (2012). Because of its huge amount, Japan’s ODA has been in the focus of many studies. Katada (2002) argue that the dual-track ODA policy in Japan is influenced by the two competing triads, those are MITI/MOF/private sector and MOFA/general public/international community triad. I think the first triad shows the realist side of Japan, while the second triad shows the idealist side of Japan. These competing triads can also partly represent the debate between perceived proactive and reactive status of Japan. Katada explained that this inconsistency is the result of domestic budgetary and political realities. In another side, Kim (2009) analyzes the environmental sustainability aspect of Japan’s ODA. This essay is divided into two parts. The first part is comparison between Katada’s paper and Kim’s paper; while the second part is my reflection as well as criticisms on Katada’s implicit conclusion. I argue that in the future Japan’s ODA policy will still mainly influenced by MITI/MOF/business’s triad, unlike what was implicitly concluded by Katada.
Comparison and Reflection
Firstly is comparison between the two papers. I think, in some extent, Katada’s and Kim’s paper are complementary. Kim’s paper implicitly supported the claim in Katada’s paper that ODA in Japan is influenced by gaiatsu (external pressure). Katada explained this as MOFA/general public/global community triad; while Kim explained this as the reason for environmental consideration in Japan’s ODA. Kim said that in order the sustainability issue can be included in Japan’s ODA, gaiatsu and criticism from both international and Japanese NGOs/activists are needed. Kim also explained that one reason why environmental sustainability is not implemented correctly in Japan’s ODA is because of moral hazard by Japanese consulting companies which are also the subsidiary of Japanese contractor. This is in-line with Katada’s explanation that Japan’s aid programs reflect Japan’s business interest. In short, Kim’s paper supports several points that Katada made.
Secondly, focusing on Katada’s paper, there are several reflection and criticism on it.
To begin with, Katada’s paper shows how divided Japanese bureaucracy is. The absence of clear aid objectives and approaches (even after ODA charter was adopted in 1992) has made the aid policy swing between business interest and humanitarian goals. The four-ministry system of aid, MOFA, MOF, MITI, and EPA (was removed later) which still continue until today, represents lack of political leadership in Japan.
In term of criticism, I think Katada’s implicit conclusion on the future of the two competing triads is questionable. In his conclusion section, Katada wrote”…given the ongoing political and budgetary pressure to reduce the ODA budget, the MITI/MOF/business triad’s approach towards aid might become simply too expensive to persist at current level. ODA budget cuts,……, might actually be the blessing in disguise in favor of improving the quality of Japan’s ODA in the future“. By this sentence she suggested that in the coming years, Japan’s ODA policy will be more on the side of MOFA/general public/international community triad(which focus on quality of aid and humanitarian issues). However, I think this conclusion is not correct. Besides current data current which shows that Japan’s ODA in economic infrastructure has continued to dominate (even after the ODA charter was revised in 2003), the strong held believe among Japanese official, that development is the result of hard work (self-help) and industrialization through policy coordination, is too important to be dismissed in Japan’s aid philosophy.
Furthermore, Katada also mentioned that the budgetary pressure will reduce MITI’s discourse on aid. Nonetheless, I think since the economic environment in Japan is still very ‘gloomy’, the incentive to create more infrastructure projects for Japanese corporation abroad will increase, which will be reflected in increasing ODA budget. Lastly, regionalism and production network or supply chain in Asia is still very important or even more important for Japan today, as a trading nation. The growing economy in Asia, for example in Southeast Asia, will trigger Japan to invest more in Asia through its ODA.
In term of aid structure, I believe that Japan’s aid policy will be more in MITI’s discourse in the years ahead, unlike what suggested by Katada. In addition to that, in general, I do not think that the choice between industrial promotion (MITI’s discourse) and humanity issues (MOFA’s discourse) are mutually exclusive as implicitly stated by Katada. I believe that Japanese government can pursue both goals simultaneously, for example by continuing infrastructure development assistance in the growing economies, while still pursuing humanity-focus assistance in extremely underdeveloped countries.
Katada, Saori, “Japan’s Two-Track Aid Approach: the Forces behind the Competing Triads,” Asian Survey, Vol. 42, No.2, (March/April 2002), pp. 320-42.
Kim, Soyeun, “Translating Sustainable Development: The Greening of Japan’s Bilateral International Cooperation,” Global Environmental Politics, Vol. 9, No. 2 (2009), pp. 24-51.
Origin of the Crisis: Real Economy Left too far?
By Rully Prassetya
The world has witnessed many financial and economic crises in the last century. In this presentation I will focus on the cause of global crisis 2008-2009. The widely accepted causes of the crisis will be outlined, and then why I think there is a more basic source of crisis apart from that list.
There are several widely accepted causes of global crisis 2008-2009. Some of them are bubble (excess of liquidity), global imbalances, lacks of regulation, and deteriorated further by pro-risk corporate compensation policy, financial innovation (engineering), failed rating agency, and inadequate bank capital.
Apart from the list above, I think the cause of the crisis is more basic than that. The main cause is related with the fact that our real economy is left too far from the financial (unreal) economy’s development . Most of the financial transactions in financial market are done for speculative activity. In 2010, volume of foreign exchange market turnover is around USD 4 trillion per day (BIS 2010), while the volume of trade (export) in the world is only USD 41 trillion in that year (WTO 2011). In US stock market, the average stock was hold for four years in 1945, it decreased to around eight months in 2000, and then around two months in 2008 (Haldane 2011). This wide gap between real and ‘unreal’ economy can also be found in the increasing derivatives product transaction. In CDS market for example, in 2007, number of CDS outstanding is around USD 60 trillion, while the underlying bonds is only USD 6 trillion .
Any crisis in financial sector, has affected the real sector severely. In crisis 2008-2009, the crisis has frozen the US money market, which cause liquidity crisis, then credit crunch, and finally affected the real sector. The crisis then spread to all over the world. In one of his lectures, Joseph E. Stiglitz said , “It’s really financial sector to blame. They messed up, and messed up very badly”.
The rapid development of the ‘unreal’ economy, unfortunately, happens at the same time when there is degradation of competitiveness in many countries. Countries such as United States and Europe are losing competitiveness in export market share, product, and firm competitiveness. Euro area export market share was decreased around 20% from 2003 to 2009, as well as Japan (Mauro 2010). This reduction in competitiveness is also joined by the high consumption and low saving rate in the US.
There are many measures that have been taken by government in response to this crisis, however, the measures that were taken to overcome the crisis, such as introduction of financial transaction tax, increase in bank capital requirement, injection of liquidity to the market, etc., will only give a short term cure, but will not solve the core problem.
The financial company will keep outsmarting and challenging governments’ rule, as Christine Lagarde said , “It is human nature to try and overcome obstacles…government set the rules, and the corporate world pays tax specialist, lawyers, and management consultants, to find ways to circumvent the rules. Each side is constantly trying to outsmart each other”. One set of regulation, called Volcker Rule in the US, which prevent the commercial bank from doing speculative investment by using customer deposit, receives a lot of challenges from the banking sector to be implemented.
As the conclusion, a more fundamental reform to the economic system should be taken. As long as our regulation still allows the real and ‘unreal’ economy widen its gap, the crisis will keep coming. This reform might be difficult to be implemented, given the fact that many governments and academic are captured by the financial sector, but it is highly necessary if we want live a more just and stable (financial) world.
We are the Source of the Emerging Risks: A Reflection for Today’s Generation
By Rully Prassetya
Introduction: The Young 21st Century Generation
The 21st century generation is like no other generations. The 21st century generation has lived in such instable world since their youth: Dot com bubble 2000, 9/11 terrorism attack, Iraq invasion 2003, US housing mortgage crisis 2008, the Arab spring 2011, the Eurozone sovereign debt crisis, and many other global instabilities. All of these crises give reasons to expect many other crises are coming in the few years to come.
There are long lists of emerging risks pointed out by many experts in the beginning of this 2012, such as the gloomy outlook for the Eurozone debt crisis by many financial experts and “Ten Top Risk” list which has been identified by the Eurasia group, a global think tank, for 2012 . The “Ten Top Risk” list is the end of the 9/11 era, G-zero and the middle east, Eurozone, US, North Korea, Pakistan, China, Egypt, South Africa, and Venezuela.
To simplify, I think there are three major groups of crisis the 21st century generation are facing and will continue to face in the years to come. The first group of risk is the global financial risk. It involves the liquidity issue, derivatives product, and the huge debt burden in many countries. The second group is the international relation and security group. The main thing that I pointed out here is the instability in Middle East and Korean Peninsula, as well as the changing global leadership architecture. The last one is the political group. Here, I focused on one single biggest problem in the political world, which is questioning why our current democracy system cannot deliver our ideal. After elaborating the emerging risks, the reflection on this situation will be discussed.
Firstly, the Financial Risks
The financial system has been so rooted in people’s daily life. Any change or crisis in global financial system will affect even a financially illiterate citizen. Who would have predicted that Lehman Brothers’ bankruptcy has affected textile factory workers in China? Thus the question is whether we have a good and reliable financial system. There are three major risks which are coming from the financial system.
Firstly, in regards to the global financial meltdown 2008, we are not solving the core problem. The way we manage the crisis is by injecting more liquidity into the market, such as the quantitative easing policy, very low interest rate, etc. All of these policies create excessive liquidity which would create another bubble in the financial markets and will result another crisis in the years to come. In one of his interviews , economist Jeffrey Sachs commented on this condition by saying “That’s not a free market, that’s a game, and we have to get out of the game. We have to get back to grown-up behavior”.
Secondly, right now there are too advanced or complicated derivative products which would lead to another crisis. In one of his public lectures , economist Paul Volcker mentioned the derivatives financial products had caused the financial crisis. He also said “In my view, (banks) should not take part in speculative activity … I would like to see that rule adopted in Singapore and right around the world”.
Lastly, the problem of huge public debt burden will definitely be a huge risk for the future generations. The current generation has lived with a very irresponsible way, both from the financial point of view as well as from environmental point of view. By mid of January 2012, the total government debt around the world is USD38 trillion . The excessive exploitation of natural resources and environmental damage are also continues. Definitely, the future generations are the ones who will be liable to pay for all of these. This is very clear type of transferring risk. Besides that, one ‘unhealthy’ lifestyle of the current generation, that is the reluctance to have children, will also affect the future generations. The future generations would be burdened by very high taxes or very low level public services because they have to pay for the current debt made by the current generation and to support their parents’ health care. This is a very ‘unhealthy’ situation.
Secondly, the International Relation (IR) and Security Risks
The second group of emerging risks is coming from IR and Security area. The IR and security issue has always been a top priority of many countries. Countries are continuing to maneuver in international arena. At least there are two major risks in IR and security area.
The first one is the instability in Middle East and Korean Peninsula. The unresolved tension between Iran, US, and Israel will dominate the instability in the Middle East together with the changing leadership in Middle East countries. Another big security threat is the North Korea nuclear program which is threatening the region’s stability. Failure to deal with this risk will cause a huge damage to the world peace.
The second one is the changing architecture of the global order. Currently, the absence of any country to take leadership in the global architecture has affected the global affairs. Kishore Mahbubani, an IR scholar repeatedly described the current global order as living in separate decks in one ship but there is no one who wants to be the captain. He pointed out the ultimate reason of this condition is because the national leader is elected by their own national citizens, while lately, increasing number of domestic problems has drawn much of their focus. At the end, the international arena is left without determined leadership, which is a bad condition for any country.
Thirdly, the Political Risks
The biggest challenge in the current political system is the corrupt democratic system that many countries are practicing today. Most of the politicians are bought by the private sector and they are just thinking about their next election. This fact has led to many undelivered democracy around the world. In one interview , Daniel Newman, the executive director of MapLight, mentioned that “We have a corrupt system where government is responsive to the donors and not to the citizens …. Companies and rich individuals can spend as much as they want to buy the politicians they want to office”.
The Risks Are Coming from Our Selves
“To the question of your life, you are the only answer. To the problems of your life, you are the only solution”. I think this quote from Jo Coudert is quite appropriate in this time of uncertainty . After considering the list of emerging risks facing the future generation, it is worthwhile to reflect what is going on right now. I firmly believe that the thing that we need to do is to evaluate ourselves, i.e., to evaluate our ideology and our way of life. Tom O’Connor once said, “Your distress about life might mean you have been living for the wrong reason, not that you have no reason for living”.
There are many facts which make us question whether we are really better off compared to generation hundred years ago. This generation has involved in and witnessed many wars, even the use of nuclear weapon which killed more than 200,000 people at once in 1945. Currently there is also a deteriorating Eurozone debt crisis and economic slowdown in the US. The sea level and temperature around the globe also keep increasing. There are also many negative incidents of nuclear and oil production which affect many human’s and ecosystem’s well-being. Last but not the least, one of the most surprising facts, there is widening income inequality among people around the world as their economy develops.
Most of the problems mentioned above are caused by materialism. Our subscription to materialism, which put material as main destination, has triggered some countries possess nuclear threat because they want to rule the world, (our greediness) caused the global meltdown 2008 and 2009, as well as causes many environmental damage, etc. Together with subscription to consumerism and hedonism, our generation seems to be in a worse condition than previous generation.
Aren’t All of These Signs Enough? We Have to Evaluate Ourselves
“Know thy self, know thy enemy. A thousand battles, a thousand victories”
The ideal ideology that we are proud of right now is the capitalism and democracy. The fall of Soviet Union and the Berlin Wall are a great proof for democracy and capitalism supporters that their ideology is the supreme ideology. No wonder why Francis Fukuyama, an American sociologist said , “What we may be witnessing is not just the end of the Cold War, or the passing of a particular period of post-war history, but the end of history as such: that is, the end point of mankind’s ideological evolution and the universalization of Western liberal democracy as the final form of human government”. However, the number of economic crises (which occur more often and on a bigger scale) that we are witnessing right now, together with the diminishing people’s trust to their elected government, are an obvious sign that something must be corrected here.
We need to change our way of life. Hearing about changing way of life, people might respond, “Are you suggesting all of us to be Buddhist monk?” The advanced living standard that we have now is a positive thing. We can have different options for lunch and dinner. We can even enjoy ice-skating in the middle of desert. However, many cases showed different story. The subscription to materialism and consumerism has driven the climate change problem, the low birth rate and high abortion rate, as well as the advanced form of disease that we have never seen before. A necessary change in our way of life, which is currently extravagant, has to be made. One simple example is from our way of consumption. Chandran Nair , author of constraining consumption stated that the western model of consumption led development is not sustainable. We have to ban some form of consumption and re-price the resources.
There have been many crises and risks that we have faced, either the nature related or the non-natural disaster, such as security disputes and financial crises. As a human being who aspires a better world to live in, we have to take lessons from all of these events. There are already enough wake up calls from the universe. We have to change ourselves, i.e., change our ideology and our way of life.
A great general is not the one who just fights its enemy brutally no matter what happened till his death, but the great general is the one who knows when he need to step back, evaluate his strategy, and then beat his enemy. The great Chinese philosopher Sun Tzu said “If you know the enemy and know yourself you need not fear the results of a hundred battles”. It is never too late to evaluate and reflect on what had happened, and make necessary change in ourselves. Thank you.
Indonesia and the Current Global Economic Slow Down
By Rully Prassetya
Two major economic events have slowed the world economic growth down in 2011, namely economic slowdown in the US and Eurozone sovereign debt crisis. In this short essay, the current global and Indonesia’s economic condition will be discussed as well as strategies that should be taken by Indonesia to keep expanding its economy and contributing to solve the global economic problem.
In the late November 2011, OECD released OECD economic outlook report which stated that world economic growth projection for 2011 will be lower than previous prediction. The report also outlined two major challenge to global growth, the excessive fiscal consolidation in the US and Eurozone sovereign debt crisis. OECD predicted, if US continue its excessive fiscal consolidation plan, world economic growth in 2012 will be lower by 0.51% from the baseline projection. Furthermore, if this consolidation is followed by deteriorating Eurozone crisis, world economic growth in 2012 will be lower by 1.83% from its baseline projection .
This uncertainty in the global market has not really affected Indonesia, thanks to a strong Indonesia’s domestic economy. Many analysts predicted that Indonesia’s export and import will be lower in 2011 compared to 2010 because of weak demand from US and Europe, in fact, in January 2nd 2012, BPS (Badan Pusat Statistik) released report stated that Indonesia’s export increased around 32% in 2011 and import by 31%. This number, together with 6.5% economic growth in 2011, shows that Indonesia is success in passing through this hard time. Since the crisis has not really affected Indonesia, the challenges in Indonesia’s public financial management are mainly come from domestic. The challenges as well as strategies that are needed will be discussed below.
Firstly, Indonesia needs to further strengthening its domestic economy. Currently, more than 50% of Indonesia’s GDP is coming from household consumption. As the world 4th most populous country, Indonesia’s domestic economy still has a huge growth potential in many sectors. Several options available are expanding working credits, reducing red tape, and improving infrastructure. A sophisticated analysis and plans had been outlined by the government in Master Plan for Acceleration and Expansion of Indonesia Economic Development 2011-2015 document. What Indonesia needs now is a quick action from the government.
Secondly, Indonesia needs to tighten the regulation of Indonesia’s banking and non-banking financial system. The government needs to forbid them to invest in heavily derivative products. Many US financial institutions are in trouble because of their investment in toxic assets. Healthy country in Eurozone, such as Germany and France, are greatly affected by Greece and Italy sovereign debt crisis because of their Banks invested in these junk bonds. Besides that, Indonesia also needs to watch the capital inflow and outflow. Furthermore, to prevent the crisis in 1007/1998 happen again to Indonesia, government need to build its foreign exchange reserve as well as establish more SWAP agreement with other countries.
Thirdly, the challenges in Indonesia’s public financial managements have to be fixed. There are many rooms for improvements in Indonesia’s tax collection system, budget allocation, budget use, public finance auditing, etc. For example is in tax collection system. By 2010, only less than 17% of Indonesia’s work force registered as tax payers. From that 17%, less than 50% of them reported their personal income tax in 2010, not to mention whether the tax is reported correctly . This shows that there is huge challenge in Indonesia’s public financial management which needs to be solved quickly.
Lastly, Indonesia has to try to promote equal opportunity to all of its citizens to get education and healthcare. Many problems around the world are caused by inequality. This is reflected in the occupy Wall Street movement and we are the 99% movement. If this inequality problem can be overcame, not only the economic growth will be higher, a more stable and unite Indonesia will also be achieved. Currently, Indonesia’s Gini coefficient is below 40.
Besides all of those domestic policies, as a rising global payer, Indonesia should also actively contribute to solve the global problem. Several things that can be done are urging reform in China’s currency and urging decisive action in Eurozone. If the current weak Yuan can be fixed to its real value, the global imbalanced will be solved. This will boost production in troublesome countries (US and Europe). Besides that, Indonesia also needs to urge decisive action on euro problem by Eurozone countries. Currently, the solution taken by Eurozone leader is a short term solution because they protect their own national interest.
To conclude, the writer argues that the current uncertainties in global world has not and will not affect Indonesia very much. Thus concern should be directed upon further strengthening the domestic economy and improvement in Indonesia’s public financial management, such as tax collection system, budget allocation, budget use, and public finance auditing. However, Indonesia still need to participate actively in solving the global problem by urging China to reform its weak currency and urging Eurozone leaders to take more decisive long term solution. (Rully)