Author: Peter McCawley

It is now almost five years since December 2004, when the great tsunami swept across more than a dozen countries in Asia. More than 230, 000 people died across the region. The cost to human life was mainly borne by Indonesia, in Aceh, where perhaps 170, 000 people were swept away. Five years later, the pain is still evident across Aceh. Many thousands of families will forever carry the memory of family members who were lost. The human cost was immense.

There are many lessons to be drawn about disaster relief policies in Asia from the experience of the 2004 tsunami. Below I list eight key lessons that need attention above all others. Read the rest of this entry »

Author: Peter McCawley

Last Thursday president Obama made his much-awaited speech on United States–Muslim relations at Cairo University in Egypt.

In the words of The Economist, ‘he sought to project an openness to Islam, a sense of shared values, support for Muslim aspirations and a determination to use American power to help fix the problems that most trouble them.’ The speech went well. The Economist’s view was the President ‘used his oratory to superb effect.’

But oratory aside, what messages did President Obama have for Muslim countries beyond the Arab world? Indonesia is the world’s largest Muslim country; what was the significance of president Obama’s speech for Indonesia?

Read the rest of this entry »

Author: Peter McCawley

Hillary Clinton’s visit to Jakarta last week was presented as extremely successful. She said all the right things, and her Indonesian hosts made all the right moves in return. But what do we make of it? Answer: Hard to say, really, because the visit was basically a honeymoon visit. One U.S. blogger even called the visit a “lovefest.”

It is interesting that the Obama Administration decided to have Secretary of State Clinton make Asia the destination of her first international visit.

Three points are worth noting.

First, the symbolism of the order in which the countries are being visited – Japan, then Indonesia, and only then Korea and China – is of some interest. The decision to visit Japan first (something of a contrast with the priorities of the Rudd Government here in Australia a year ago) underlines the key importance of the U.S.-Japan bilateral relationship in bolstering stability in Northeast Asia.

Read the rest of this entry »

Author: Peter McCawley

Imagine my surprise, doing a quick early morning check of the New York Times front page on Tuesday 16 December, to see the word “Indonesia” listed on the NYT’s Op-Ed site.  The world’s largest Moslem country, and the world’s third largest developing nation, is generally invisible in the U.S. media so I immediately followed the link to find out what was going on.  But the article was by an Australian rather than an American commentator.  It was the Lowy Institute’s own Michael Fullilove making a strong pitch for President-elect Obama to choose Indonesia as the site of his promised first Presidential speech at a “major Islamic forum”.

It’s a great idea.  Let’s hope it happens.  But in most countries, a good deal of foreign policy is drawn up to play to domestic audiences.  Sadly the suggestion isn’t likely to take on, is it?  Consider the arguments that Obama’s staffers will likely wheel out against the idea.

Read the rest of this entry »

Author: Peter McCawley, ANU Indonesia Project

Stephen Grenville pushed a piece in the Australian Financial Review last week on one of the most difficult issues of current public policy in Indonesia – corruption. Stephen considered the possibility of tackling corruption with a “big bang” approach but decided that this was impractical.

Stephen notes that the judicial system (and, indeed, much of the rest of the public sector) is “market-based”.  And this, indeed, is surely part of the core problem – that the line between “non-market goods” on one hand, and “market goods” on the other, is blurred in Indonesia and in many other poor countries.  This is an enormously complex problem to which there is no easy answer. Read the rest of this entry »

Author: Peter McCawley, ANU Indonesia Project

Although measured levels of poverty have been falling in Indonesia in recent years, mass poverty remains a major public policy issue in Indonesia. And there is much discussion within Indonesia as to the best policies for tackling poverty.

The debate about mass poverty in Indonesia could usefully draw on material in the important “Chronic Poverty Report 2008-09″ released recently. The report (with a helpful summary) is available here.

The main points of the report are very thought-provoking. Read the rest of this entry »

Author: Peter McCawley, ANU Indonesia Project

Finance Minister Sri Mulyani was in Australia recently (Monday 4 August) to attend an APEC Finance Ministers meeting in Melbourne.  The issues discussed at the meeting may (or may not) signal an important change in approach to some aspects of regional economic policy-making in the ASEAN region.

For a long time APEC meetings have tended to focus on “at the border” trade issues.  Top priority issues have been tariffs and other border restraints on trade.  Much of this discussion has proceeded as if all the action took place at the border!  But recently there has been an increasing awareness in APEC meetings that other “non-border” barriers to trade might perhaps be important as well.  Some people who have worked on the broad range of development issues in Asia for a long time would say “About time, too!”

Read the rest of this entry »

Author: Peter McCawley, ANU Indonesia Project

Stephen Grenville has an article on the latest OECD report on the Indonesian economy in the Australian Financial Review today (Monday 28 July, p. 23).

In his piece, Stephen notes that there has been a welcome lift in the economic growth rate in Indonesia. Annual growth is now slightly over 6% per annum. But Stephen also notes that there is surely room for a further acceleration in the growth rate. He suggests that a longer-term target of 8% per annum is worth thinking about. This issue – the long-term economic growth rate – is surely the single most important matter that economic policy-makers in Indonesia should focus on.

Read the rest of this entry »

Author: Peter McCawley, ANU Indonesia Project

Energy subsidies in Indonesia are threatening to get out of hand. What is very worrying is that Finance Minister Sri Mulyani recently warned that total energy subsidies (which include both fuel and electricity subsidies) might reach Rp 300 trillion (around $US 32.5 billion) next year. This would amount to a 50% increase over the level for the current 2008 fiscal year which is now expected to reach Rp 200 trillion (around $US 22 billion).

Minister Sri Mulyani made her warning on the basis of an assumption that international oil prices might remain around $140 per barrel. Even making the optimistic assumption that oil prices will fall somewhat, it will be hard to contain total energy subsidies in the 2009 fiscal year to less than (say) Rp 230 trillion. This would be around 20% of total forecast government spending in 2009 (currently predicted to be around Rp 1,150 trillion, or close to $US 130 billion). To be spending as much as 20% of the government budget on energy subsidies is no fiscal joke. And some members of parliament have openly speculated that the share of government spending going to energy subsidies could go much higher.

Two points need to be borne in mind in considering the situation. One is that the headline figure to watch is the size of the “energy subsidy”. The “fuel subsidy” and the “electricity subsidy” are included within the total level of the energy subsidy. A focus on just the fuel subsidy or the electricity subsidy alone masks the true size of the problem.

The second is that essentially, the problem concerns prices. Close to four decades ago the international development community spent time discussing the importance of “getting prices right”. It seems that we need to revive discussion of this central issue in development policy.

Author: Peter McCawley, ANU Indonesia Project

How did it come to this? Blackouts are spreading across Java, and are increasingly common in the Outer Islands as well. But policy-makers in Indonesia have known for at least five years that a power shortage was looming. Why was so little done?

The short answer is that there has been an extended period (for over five years!) of foot-dragging in Jakarta over planning for new investment in power. It has been widely known that around 10,000 MW of new generating capacity is needed (compared to existing capacity of close to 30,000 MW). But there have been extended delays for all sorts of reasons – technical, financial, political – with different planners, financiers and officials all busy blaming each other. Strong ministerial intervention was needed to coordinate plans for new investments, but the required action was never taken.

This is all going to be very costly for Indonesia. The Philippines went through an electric power crisis in the early 1990s so we have a good idea from the experience in the Philippines of what is likely to happen. First, various “crash programs” will be announced (this has already occurred in Jakarta). Second, blackouts will become more and more common. In Manila, the “brownouts” (as they were euphemistically called) sometimes lasted for up to 10 hours across the capital. Third, the inconvenience and lost productivity caused will be great. Traffic lights, for example, will fail for long periods, and traffic jams will become worse. Food will go bad in restaurants and homes. Blood supplies in hospitals will warm up as refrigeration fails.

And there will be lots of black humour as people try to cope. In the Philippines in 1993 one popular joke was to ask: “What did people use for lighting in the Philippines before they used candles?” Answer: “Electricity.”