Trade Minister Mari Pangestu on Priorities for National Development: Sustainable and Inclusive Growth

Technology has made ‘almost’ everything possible. In a corner of the capital city of Jakarta, there was an uncommon view: a professor in economics of an Australian university, Professor Christopher Findlay of University of Adelaide, interviewed the Indonesian Trade Minister, Dr Mari Pangestu, about Indonesia’s priorities for national development using the professor’s phone.

Within seconds, the interview was made available to public through a social media site which specifically designed to post and share audio files.

Listen to the full-interview:

The result of such an interview was easily predicted: an excellent interview.

Minister Mari viewed that Indonesia’s main priority for national development is to have sustainable and inclusive growth.  The inclusive growth implies the growth has to be ‘broad-based’ across provinces and reduces the existing income inequality.

Minister Mari pointed out that to make this broad-based growth possible there are some key aspects that the Indonesian government needs to addresss.

The first aspect is infrastructure development. This ensures national connectivity and helps less-developed regions to catch up with more-developed regions particularly on the Java island.

The second aspect  is universal education and access to health. This addresses people’s basic needs.

The third aspect is poverty reduction programs. The pro-poor programs include the provision of subsidised rice, cash transfers and community development programs.

The fourth aspect is microfinance schemes. The schemes help small and medium companies to access credits.

On the notion of sustainable growth, Minister Mari explained that the key aspect is obivously the environment component. Indonesia has national climate change programs aiming at lowering C02 emissions by 40% in the next 20-30 years in addition to a number of other conservation and reforestation programs.

Prof Findlay further asked how infrastructure development has been going in the last couple of years. Minister Mari explained that because of the impacts of the 1997-1998 Asian financial crisis, there has not been much progress in infrastructure development in Indonesia.  Even the mantainance of infrastructure in Indonesia has not been done very well. The slow infrastructure development has been mainly due to budgetary issues. Since the Asian crisis, Indonesia has not been fully recovered.

Since 2005-2006, the Indonesian government has introduced a regulatory framework and incentives for infrastructure development to attract investments not only from the government but also the private sector. The progress, however, has been quite slow. One of the biggest issues is problems with land acquisition. Minister Mari suggested that a new land law is needed to provide a mechanism such that the government can take over the land for public use.

Some thoughts:

If only all Indonesians had access to internet, if only all ministers, politicians and other decision makers were as approachable as Minister Mari, understanding and discussion of complex issues that Indonesia is currently facing would have been much simpler. Also, the more we discuss, most likely the more ideas we have and the better outcomes we would achieve.

There are at lest three things can be learnt from Minister Mari’s explanation. First, the Indonesian government has done quite important steps in shaping the national development agenda. Recognising that reduction in income inequality as an important agenda of the economic development is crucial because the issue is still an issue. Leigh and Van Der Eng (2009) concluded that top income share in Indonesia is relatively high (Leigh in his other paper suggests that top income share is significantly correlated with inequality measures such as the Gini coefficient).

Second, the Indonesian government now seems to acknowledge the role of private sectors more than they did in the past. The preparation and implementation of  the Master Plan for the Acceleration and Expansion of Indonesia’s Economic Development (MP3EI) , for example, seems to actively involve or plan to involve private sectors.

Lastly, the needs of a better regulatory framework and law enforcement are evident. A land law to ensure infrastructure development is one example as Minister Mari mentioned.  At a broader scope, an efficient (not necessarily stricter) regulatory framework  is normally insufficient; the government needs to enforce the law, endorse property rights, etc. However, we should be careful about supporting ‘strong states’. Strong states indicated by the government’s ‘interventionist’ policy approaches are normaly built upon the fact (ironically) that there has been low investments by the private sector that actually needed for economic growth.  With land acquisition issues, the regulation to allow the government to take over land for public use might be stimulated by conflicts between the land owners who are reluctant to ‘make an investment’ in public facilities (that is by selling their pieces of land) because the offered price is lower than their ‘reservation’ prices, and the government. The land laws may be able to force these land owners to give their land up but that may create rent-seeking opportunities, etc.

Perhaps, not too weak, but not too strong either? It’d never be an easy task to balance between regulating to address market failure and allowing market flexibility.

This article is prepared by Risti Permani.

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1 Comment

Filed under Economic development, Income inequality, Indonesia, Infrastructure

One response to “Trade Minister Mari Pangestu on Priorities for National Development: Sustainable and Inclusive Growth

  1. Pingback: Blaming the government « Indonesian Labour Studies (ILS)

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