[ppi] [ppiindia] What political economy?

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http://www.thejakartapost.com/detaileditorial.asp?fileid=20051228.E02&irec=1


What political economy? 
Meuthia Ganie-Rochman, Jakarta
The fall of the Soeharto regime also saw economists lose their traditional 
tools to analyze the economy.

Under the centralized New Order system these were the causal relations between 
the creation of economic policy and interest groups. The newly appointed 
Coordinating Minister for the Economy, Boediono, once said economic 
policy-makers needed to be isolated from day-to-day politics (BIES, Dec. 2005). 
Now we have a much more confusing reality, which requires a new approach to 
economic analysis. 

The New Order system was in retrospect not difficult to analyze. There was a 
traceable pattern of economic policy -- the Soeharto government oriented it to 
growth-led economic development. Then there were the few groups of political 
and economic elites that established relatively stable networks around the 
government. This kind of economic orientation was backed up by centralized 
government and its strong economic control made it easier to see the connection 
between "interests" and policy. 

The present situation is more complex, with the traditional areas of interest 
changing as regional autonomy gives mayors, regents and governments greater 
power. 

With many more leaders competing for a greater share of the economic pie, and 
with different patrons to satisfy, much of the decisions made are for 
short-term and selfish reasons. 

Regional autonomy has divided the national economy into more confusing layers. 
As the central government has lessened its control over many natural-resource 
rich regions, its power to allocate and direct resources has also been 
curtailed. 

Regions and provinces have become arenas for political and economic competition 
by politicians often inexperienced with the levers of power. 

It is true that there is still a great portion of regional budget funds handed 
out by central government. However, the lion's share -- as much as 80 percent 
in many regions -- are allocated only for maintaining the existing structures 
of the bureaucracy. These regional governments need to develop local sources of 
revenues for other development activities if they want to benefit their 
communities and get voted back in the next election. 

One common feature of a country in transition is the growth of a black economy 
-- the money funneled away by widespread corruption, the massive destruction of 
politically sanctioned illegal logging are both examples of non-taxed 
economies. 

This sorry situation means the actual detail -- or dearth -- of policy must 
become a focus of the national administration. Ministers must put forward 
intelligent, workable policies to encourage politicians below them to do the 
same. 

President Susilo Bambang Yuhoyono's majority in the House should make the focus 
on policy easier. But he has to bring his supporters into the fold, otherwise 
ministers will again start using the ministries to raise party funds. One clean 
party could also begat another if the opposition realizes its political future 
depends on good governance. 

Bureaucratic reform is vital to this process. Countries that have been 
successful in improving their economic performance --Singapore, Korea, and 
China -- all started by reforming their bureaucracy. 

Experienced economists, meanwhile, are necessary to guide the country down the 
road to development -- but leaders need to be more than just technically 
competent, they also must be tough, smart political operators, and good 
managers. 

Analyses also needs to be made to determine the power and influence of central 
versus local government in particular sectors. The main power the central 
government can still exercise over regional administrations is through the 
allocation of regional grants and through the enforcement of national laws. 

Most of the regional governments' budgets, however, are sucked up by their 
bureaucracy and otherwise misdirected to support leaders' political agendas. 
There is some hope, however. In some cases, responsible local administrations 
are actually working with the state government to improve governance and 
increase education and health infrastructure. 

The blank spot here is the black economy. The continued oil smuggling by 
Pertamina officials in cahoots with regional officials, and the 
billion-dollar-a-year illegal logging industry that could not go on without the 
involvement of local leaders has shown how lawless and out-of-control the 
regions are. 

If this country is to meaningfully reform, these mini-fiefdoms and their 
supporting bureaucracies must be held to account now. 

The writer is a lecturer and researcher at the Department of Sociology 
University of Indonesia


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