by Jennie S. Bev, Santa Clara
After
Widjojonomics and Habibienomics, we are now in the Hattanomics era, a term referring to the policies of Coordinating Minister of Economics Hatta
Rajasa and popularized
by Kevin O’Rouke in “The Politics of Indonesia’s Protectionism” (The
Wall Street Journal, May 23). The three fundamental elements of
Hattanomics: protectionism, trade barriers,
and restrictions on foreign investment. Policies
based upon these underlying principles include the economic development
master plan (MP3EI),
massive private sector financing, limiting
foreign ownership, export restrictions, import quotas, renegotiation of mining
contracts, restrictions in raw
mining products export, restrictions on some finished-goods imports, and requiring foreign investors to sell majority stakes
within ten years.
Its ultimate
goal is helping Indonesia to become a developed country and a top ten world
economy by 2025. It would require an
average economic growth rate of at least 7% involving collaborative
efforts among private and public sectors
as well as local government entities.
Despite
its noble intention, Hattanomics comes with huge risks. In “Political Bubbles: Financial
Crises and the Failure of American Democracy” by Princeton professors Nolan McCarthy, Keith T. Poole and Howard
Rosenthal, the authors attempt to show that while “financial bubbles” are a mix of mistaken beliefs, market imperfections
and greed, “political bubbles” are the concoction of ideologies, unresponsive
and ineffective government institutions and special interests.
It
is common knowledge that political interests blind regulators to weaknesses contributing to
an economic bubble. The 2008 financial crisis that started in the U.S. could also occur in Indonesia. This so-called
“political bubble” has the potential to initiate a major economic downturn.
Political
bubbles usually occur before economic bubbles. In 2008, various policies for
investors were either relaxed, ignored
or eroded to help fuel an economic boom. This model was said to contribute to a
trickle-up effect, rather than a
trickle-down one, resulting in further
enriching the 1 percenters—and alienating the 99 percenters against them.
If
Indonesia implements Hattanomics without balancing it with aggressive poverty
alleviation and civil service reform programs, it
has a high risk to fail. Another caveat about economic
issues: the less government interference the better in most cases. The question
is what is the right balance in governmental involvement? How far and how fast the
market can correct itself is also a tricky question.
A
question to ponder upon: Can we ensure that Hattanomics is implemented with
minimized risks from huge red tape, inefficient bureaucrats, corrupt officials,
and abused legal loopholes, while maximizing the benefits to the poor and the
middle class? After all, the whole economy stands on the shoulders of such consumers,
who are the bulk of the population.[]
Jennie S. Bev is an award-winning author and
columnist. She is the CEO of a digital venture based in Silicon Valley. Her
blog is jenniesbev.typepad.com.
Forbes Indonesia, August 2013
