American Indonesian Chamber of Commerce


Structural Reform Anxiety

Its amazing and somewhat anxiety producing to watch both the US and Indonesia democracies struggle over structural reforms.   An inflection point seems to have simultaneously been reached in each country, with each nation’s future depending on their implementation.  In America’s case its primarily the troubled rollout of a new and improved healthcare system as well as our budget reform process and in Indonesia’s its primarily the ongoing crisis of upgrading the country’s basic infrastructure.  The promise of ACA beyond the enrollment of the uninsured, was lower costs to employers, who are the primary providers of insurance.  That promise appears, for the moment, to be challenged.  Indonesia desperately looks for private investment in infrastructure, but after a decade of trying and an ambitious plan (Master Plan for Acceleration of Development), only 5% of the total target has been spent.  A period of strong economic growth appears to be winding down, partly due to external factors, but also due to the inability to make the hard political decisions required for structural reforms.   In each country, a divided government, is partly to blame.  In the US the division is more stark and ideological; in Indonesia, its more about protecting turf and political insiders.  There a wider coalition of parties and a host of quid pro quo loyalty mechanisms (many laced with patronage) creates a complex web of relationships that stymy an executive branch committed to reform.   Vice President Boediono, recently interviewed by the Wall Street Journal, said, “The formal system is a presidential system, and it’s supposed to be that the president can appoint whomever he wishes to appoint in the cabinet. But this is not truly a presidential system like in America because our Constitution says that for quite a number of things the president needs approval from the Parliament. That means that if you are not in the majority, you have to accommodate political parties and appointees within the cabinet. You cannot get away from some kind of coalition. I foresee that in the next 10 years or so this kind of thing will still happen. That’s compromise.”  
Here’s my anxiety, I am worried Indonesia cannot afford another 10 years of coalition governments with Ministries that cannot coordinate with each other to enact the structural reforms that will unlock Indonesia’s potential and move its people out of poverty and fully integrated in the global supply chains of goods, services, and ideas.