Indonesia and G20:

Challenges and Opportunities for a New Emerging Economy

Don K. Marut

 

In January 2012 the public media exposed photographs entitled “Indiana Jones from Lebak, Indonesia”.[i] The photographs told the stories about primary school children hanging on ropes to cross rivers on their way to and back from school. The same stories came out also from different parts of Indonesia. The stories and pictures clearly reflect the real situation of rural infrastructures and social services in Indonesia.

This is one of the paradoxes of one of the big emerging economies in the world. On one hand Indonesia’s GDP increase remarkably, with high economic growth (above 6% per annum since 2008), investment grade is getting better and the financial market remains stable during the global economic volatility. Economist Nouriel Roubini’s assessment on Indonesia’s economy helped strengthening confidence of the Government of Indonesia on its economic policies and programs.[ii] On the other hand poverty and inequality become appallingly severer. Disparity between the rich and poor, between urban and rural, and between Java Island and outer islands is widening.

 

It is in this situation that Indonesia is challenged to become active player in the global economy to promote balanced and share growth. Indonesia’s membership in G20 was seen with cynicism by most of development practitioners and public media in Indonesia at least until 2008. The public preferred Indonesia to be focusing on domestic development issues, such as poverty and social peace, rather than involving in global issues that were not in line with the domestic demands. Indonesia’s membership at the initial formation of G20 was also debated, particularly since Indonesia was not only hit by economic crises but also by conflicts among various elements of society that raised question whether Indonesia could survive as a united country. The former President of the World Bank and former US Ambassador to Indonesia, Paul Wolfowitz, was surprised that Indonesia could survive the crises and internal conflicts.[iii] Then Wolfowitz became amazed of Indonesia’s economic development and progress in democracy.[iv]

 

Indonesia’s membership in G20 is no longer questionable. But there remain also questions as to what Indonesia can achieve from G20 and what Indonesia can do for the global economic development and justice? Can Indonesia bring the issues of severe poverty in poor countries to G20 agenda?

 

The government of Indonesia seems to become more optimistic and more confident with its position as G20 members, and also optimistic that it will be able to implement the commitments at domestic level and promote the national development agenda into the agenda of G20. CSOs, on the other hand, are mostly still pessimistic with Indonesia’s commitments. Anti-corruption commitments, for instance, is still a serious obstacle to Indonesia’s economic development. Although Indonesia has developed a national action plan for combating corruption, corruption seems to be still rampant.

 

 

National Development Plans and G20 Development Agenda

 

The medium-term development plan (2009 – 2014) can be summarized into four development jargons: pro-growth, pro-job, pro-poor and pro-planet. In G20 Indonesia is focusing on the issues related to the above development goals; while supporting all other agenda that are instrumental for the achievement of the national development goals.

 

In 2011, during the consultation between CSOs and government on the 2012 national annual development plan, the issues brought in the G20 have been included and mostly are related to the development agenda of G20 with its Multiyear Action Plan. In 2012 CSOs – government national consultation on 2013 national annual development plan, the issues raised in G20 development agenda have been integrated in the draft of the 2013 national annual development plan. This shows the commitment of Indonesian government to harmonize the international commitments with the national development plans and programs.

 

In preparation to Los Cabos G20 Summit, Indonesia will focus more on Development Agenda issues, particularly on three main issues: (1) Infrastructure; (2) Food Security, and (3) Financial inclusion

 

Infrastructure has been at the top of the list of priorities of the government of Indonesia in the last ten years. There have been two infrastructure summits held in Jakarta to promote opportunities for international actors to involve in infrastructure investments and to promote Public Private Partnership. Indonesia has established Public Trust Fund for infrastructure to facilitate Public-Private Partnership. Infrastructure has become also big concerns of ASEAN countries. Hence ASEAN also has prepared the establishment of ASEAN Infrastructure Fund, to be operating in mid-2012m, to boost development and connectivity of ASEAN countries to accelerate the preparation of the ASEAN Economic Community.[v]

 

There are opportunities for investment in infrastructures which include: transport, information technology, irrigation, energy supply etc. Incentives provided by the government for investment in infrastructure have been even over-benevolent.

 

In the issue of food security, Indonesia focuses on the increase of domestic production, food stock mechanism, food quality. Indonesia in cooperation with the World Food Program has started developing a map of food vulnerability in one province and will be followed by other provinces. Food security is also an issue in ASEAN, and the governments of ASEAN together with three partner countries (China, Japan and Korea) have agreed to establish ASEAN Rice Reserve Fund to ensure production and food stock and to conduct research on rice varieties and climate resistant seeds.[vi]

 

Financial inclusion is also a focus for Indonesia. There have been programs of financing for poverty reduction, access of the poor to financial sources, and special credits for small and medium enterprises, but they are mostly one-shot projects that are not linked to each other. It is now in the process of finalization of systematic financial inclusion that will accommodate various mechanisms of financing for the poor or for poverty alleviation. The financial inclusion will be linked up with the National Program for Community Empowerment and various conditional cash transfers programs such as the Family of Hope Program.

 

 

Concerns proposed by CSOs

In several consultations and meetings between CSOs and government regarding G20, CSOs brought down the G20 issues down to the real situation in Indonesia. Indonesian CSOs see seven issues to be prioritized and should become the focus for Indonesia, at domestic level, and two main issues related to poor and developing countries. The national domestic issues include: (1) Food security; (2) Financial inclusion; (3) rural infrastructure; (4) Human resources development; (5) anti-corruption; (6) accountability, and (2) climate change. While related to the poor and less developed countries, there are two main issues: (1) debt burdens, and (2) international support for tackling poverty in poor and less developed countries.

 

Food security relates directly to poverty, nutrition for pregnant women and children, sustainable livelihood for small farmers and small fisher families. Food security includes also the rights and access of small farmers to land, and the rights and access for artisanal fisherfolk to sea. Financial inclusion, rural infrastructure and Human resources development are seen as prerequisites to guarantee the sustainable development and the promotion of people’s welfare. Anti-corruption and transparency and accountability relate to good governance as foundations for guaranteeing sustainable development, justice and equality; while climate change has been and will influence all aspects of the life of the poor.

 

CSOs are concerned with massive infrastructure development that prioritizes big business investments, while neglecting the rights of the poor. Infrastructure expansion, particularly those related to transport, in many cases undermines the rights of the people to lands and natural resources. Conflicts between the local communities and the government agencies are mainly caused by the absence of recognition of property rights of the people to lands and natural resources. CSOs also propose the the development of infrastructure for rural transport, access to energy supply for the poor, water supply, infrastructure supporting social services (housing, school, health services, etc.), that are all related to poverty eradication and support of sustainable livelihood for the local communities.

 

CSOs also propose that it is the time for the government of Indonesia to strengthen solidarity with the poor and less developed countries in terms that Indonesia has to voice out the interests of the poor and less developed countries (LDCs) in G20 forums. As consequence, the South-South Cooperation scheme where Indonesia is active player can be an entry point for promoting the interests of the poor and LDCs.

 

Policy Coherence

While national development goals are prioritized, Indonesia also prioritizes ASEAN economic cooperation. All commitments at international level, including in G20, will not exclude any commitment in ASEAN. ASEAN is the front veranda for Indonesia. Hence Indonesia is trying to integrate all relevant international commitments: those related to UN, WTO, OECD, APEC and G20; and put them under the national development strategies.

The problem, however, is that the commitments made in G20 and other international forums by the President and Ministries involved have not been well shared among the technical ministries who would be responsible for the implementation of the commitments at country level. While the ministries who are paying the roles at international forums are proactive in making international commitments relevant to the national development goals, many technical ministries are not well aware of the commitments; rather they are busy with their own exclusive daily business. There is a challenge for the Ministry of Finance who is taking the lead for G20 issues to ensure that policies and programs at country level have to accommodate commitments made in G20, and vice versa, the commitments in G20 reflect Indonesia’s options for national development policies and programs. Political challenges are unpredictable at domestic level, both from the executive (the ministries who are from different political parties) and from the parliament who are less informed about the G20 issues (and other international commitments made by the Government of Indonesia).

 

This is the challenge for the government of Indonesia. In one hand Indonesia have to ensure that the international commitments do not conflict to each other, and in the other hand it has to ensure the coherence with policies made by political actors at country level, including coherence among the technical ministries who are responsible for implementing the commitments.

 

Coherence and coordination are almost rare terms within the government of Indonesia. Anti-corruption can be taken as an example. Although there has been detailed national action plan for anti-corruption and an independent-cum-powerful agency of Anti-Corruption Commission, there are still judiciary institutions that are acting against the anti-corruption spirit. Although there has been detailed national action plan for climate change, but the law enforcement against illegal logging that contributes to forest destruction has not been yet promoted.

 

Food shortage and malnutrition are still severe, but real actions by the technical ministries to overcome the problems are still behind the expectations. Although these issues have been officially recognized as national problems, the technical ministries still treated the problems without the sense of urgency.

 

Coordination and coherence between the central government and the regional governments (provinces and districts/municipalities) are also of particular problems. The decentralization that has proved to be beneficial for regional development to certain extent is also hindered by the control of the central government who is still control the budgets for the regional governments. In fact it is the regional governments (the provincial and district governments) who are the real responsible agents of development. The regional governments are the ones who ensure that the commitments at international and national levels are brought into realization.

 

These are among the challenges that tie and pull back Indonesia’s legs from being more proactive in international arena, including in G20. If there is slow progress in the implementation of the commitments at national level, then coherence and coordination at country level might be the most probable causes. Fortunately the government has been aware of this issue and has started to strengthen coordination and coherence both in policy aspects, and also in institutional aspects within the government, and with other stakeholders including with CSOs.