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.

First, the objectives of those involved in the relief effort were disparate. The very large number of different donors involved in the delivery of assistance following the Asian tsunami, as well as other actors such as the media and policy makers, had many differing objectives. The effective delivery of humanitarian emergency relief was one of these objectives, but only one.

Second, the fastest response was usually provided by local communities. The key role that local communities play in providing fast relief needs more recognition; strategies to improve the capacity of local communities to cope in times of disaster should receive high priority.

Third, the overall coordination of the tsunami aid effort was often very difficult. A large number of different agencies was involved. The early establishment of credible national and international agencies with recognized standing can help improve coordination arrangements.

Fourth, responses, and the role played by different actors, varied over time. In planning, it is important to distinguish between the relief, rehabilitation, reconstruction and post-assistance stages.

Fifth, donors often tended to be supply-oriented rather than demand-responsive. Mechanisms are needed to ensure that local communities affected by a natural disaster have adequate opportunities to indicate what they see as their priority needs.

Sixth, the details of arrangements for the provision of international finance were often problematic. The performance of the international donor community sometimes fell below the standards generally expected in the delivery of international aid in terms of speed and scale.

Seventh, Local Dutch Disease effects, reflected in sharp increases in some costs for items in short supply, occurred in some areas after the tsunami. Aid planners should allow for sharp cost increases, particularly in the construction activities, when drawing up assistance programs.

Eighth, assistance following the Asian tsunami was delivered in many different ways. The way in which aid is provided has many implications for, amongst other things, the speed of delivery and effectiveness of the assistance. Donors should consider carefully the best way of providing help; choices include whether the aid should be in cash or in kind, and what form in kind aid might take.

All of these require elaboration and critical comment. Sisira Jayasuriya and I have spent the last six months bringing together a set of studies on the impact of the tsunami, and the large assistance effort that followed the disaster. This book, which will be published in 2010 by Edward Elgar with the support of the ADB Institute in Tokyo, is the first detailed study that we know of about the assistance effort following the tsunami.

This collection of papers on the topic of disaster relief in the Asian region is timely and important for our region given the onset of global climate change and the increase, by association, in the regularity of severe weather events.

1. How to play a ‘responsible great power’ role: China’s post-tsunami assistance to Aceh
2. The political and policy fall-out from the Japanese earthquake and tsunami
3. Natural disasters in Indonesia: Strengthening disaster preparedness

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?

First, it is too early to tell, of course, but it is possible that the speech will come to be seen as a landmark speech for Obama. Quite a few speeches by presidents, princes and kings are pro forma events which recycle bland messages. Not the Cairo speech. The address is very substantial both in length (55 minutes in delivery) and in content. All of the indications are that Obama himself put a lot of work into preparing the speech and felt a high degree of ownership of it. The speech should thus be seen as an important statement of the president’s own views on how the United States should work with Muslim countries.

Second, the overall tone of the speech marks a very sharp change in direction from the hectoring stance too often evident during the Bush administration. The word ‘terrorism’, for example, does not occur once in the entire speech of 6,000 words. Moreover, Obama and his speechwriters have obviously worked very hard to reach out to many different groups. The address is full of symbolic and carefully crafted references to different religions, different groups, and different interests (including, of course, to interests back home in the US).

Third, the speech is really a series of observations on seven distinct sub-topics. And the attention devoted to each sub-topic varies significantly as well: violent extremism (about 900 words); relations between Israelis, Palestinians and the Arab world (1030 words); nuclear weapons and Iran (330 words); democracy (370 words); religious freedom (340 words); women’s rights (240 words); and development and opportunity (550 words).

But fourth, it needs to be recognised that President Obama was really talking just as much about America’s problems in the Middle East as about Muslim issues in other countries. Meidyatama Suryodiningrat, writing in The Jakarta Post in a comment headed ‘Obama speaks to the Arabs, not the Muslim world’ says that the address ‘felt more like a call to the Arab world which represents 20 percent of the world’s 1.2 billion Muslims, than the Muslim world in general.’ Suryodiningrat argues that the presentation in Cairo ‘was a confusion of Arabism with Islam’ and contained ‘the dangerous mixing of politics and religion.’

And, furthermore, only some of the seven topics have resonance for Muslim countries like Indonesia. As Suryodiningrat notes, ‘At least three – democracy promotion, religious freedom and women’s rights – of his seven points are more relevant to a region whose governments are bastions of despotism than the average Indonesian.’

So whilst the Cairo address is a quite remarkable attempt by President Obama to reach out to the Muslim world, the messages it conveys are of more relevance to Arab Muslim countries than to Muslim countries elsewhere. But in one symbolic sense at least, the speech is certainly important for Indonesia: Obama takes time to single Indonesia out for specific mention four times in his address, carefully noting his own personal links with the country! This must surely be the first time in many decades that any US president has given such attention to Indonesia on the global stage. This is a welcome acknowledgement by Obama of Indonesia’s place within the broader Muslim world.

1. Indonesia and Obama: thinking past the honeymoon period
2. President Obama to speak in Indonesia?
3. Indonesia’s Obama, Washington’s Indonesia

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.

Second, it is notable that Clinton took the trouble to make a 6,000 km detour to the south across the equator to visit Indonesia next. Exactly why the visit to Indonesia was given this priority is hard to say. The other three countries are all conveniently located close to each other so clearly a judgement was made that it was symbolically important to travel to Southeast Asia. U.S. Indonesia-watcher Lex Rieffel remarked last week that ‘the agenda for Jakarta is harder to bring into focus’ than the topics to be addressed in Northeast Asia.

Rieffel suggested that issues of regional architecture need attention, particularly the U.S. role in ASEAN and Indonesia’s role in the G-20. As Rieffel sees it, ‘ASEAN is at the centre of Asia-wide regional cooperation’ while ‘for many Asians, the Pacific-oriented APEC forum is a Cold War relic that stands in the way of a more mature relationship between the United States and Asia.’

Third, the U.S.-Indonesia bilateral relationship is a tricky one. Both sides are keen to have good relations. However, priorities on each side differ markedly. The relationship is essentially a North-South one. During her visit to Indonesia, Secretary Clinton emphasised northern topics such as support for democracy, human rights, and environmental issues. On the Indonesian side, interests reflect Indonesia’s strong links with the Muslim world and with resource transfers from the North. U.S. policy in the Middle East is of much concern to Indonesia as is the likely impact of the global financial crisis. Indonesian policy makers are currently working to put together a $US5 billion line of international credit for Indonesia to draw on if needed. The matter was apparently raised by the Indonesian side during the Clinton visit.

The Clinton visit was seen as very successful on both sides. But the visit was just the first step in the U.S.-Indonesian bilateral relationship in a post-Bush world.

1. Anticipating Obama’s visit to Indonesia and Australia
2. US gives a long overdue nod to Indonesia
3. Obama’s visit to Indonesia and Australia and the TPP

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.

First, given the importance of Middle East issues on the domestic American stage, it would not be well-received in the U.S. for President Obama to go wandering off to some strange and distant land in Southeast Asia to talk about key Islamic issues.  The hardheads in Washington would quickly argue that the new and inexperienced President clearly doesn’t know what the globe looks like.

Second, there’s the personal angle. Precisely because Obama went to school in Jakarta until he was ten he is vulnerable to the charge that he is soft on Indonesia.  Critics would say that just when he should be building a new image of America across the world, he reveals his true priorities by taking time off to visit the relatives back home.  Kevin Rudd can earn lots of marks speaking Chinese but the last thing that Barack Obama can afford to do is be heard speaking Indonesian anywhere near an American microphone.

Weighing it up, the chances are that President Obama can’t afford to take the risk of visiting Southeast Asia too early into his presidency.

1. Indonesia and Obama: thinking past the honeymoon period
2. Obama, Islam, and Indonesia
3. Obama and Indonesia-US relations

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.

One central difficulty is that the resources available to the Indonesian state are very scarce – much scarcer than is commonly realised.   In rich OECD countries, governments (on average) currently spend around $15,000 per person per year.  In Indonesia, the equivalent figure last year was around $400.

This leads to two main problems.  One is that the Indonesian government simply does not have enough money to pay ministers, judges, public servants, police, and so on, anything like a proper wage.  The inevitable result is that many of these people look for ways to increase their incomes by selling whatever they have to sell.  They take the opportunity to “marketise” goods which should be provided through non-market mechanisms.

The other problem that it costs money to run a legal system.  The harsh truth is that Indonesian state with its extremely meagre budget simply cannot muster the resources needed to run a strong legal system.  Part of the long-term answer is much stronger public finances.  But in the short-term, no easy solution is in sight.

1. Exit Sri Mulyani: Corruption and reform in Indonesia
2. Indonesia to grow at 8%?
3. Indonesian anti-corruption efforts enter minefields

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. The report begins by adopting the position that “tackling chronic poverty is the global priority for our generation.” This proposition might appear unobjectionable — but is it? After all, many global activists in rich countries would perhaps argue that “the global priority” is climate change rather than mass poverty?

A second approach that the report takes is also controversial. The report is somewhat sceptical of the “Growth First” approach which many development economists (including me) give strong support to. But unlike many critics of Growth First school, the Chronic Poverty Report makes a powerful case for focusing on specific problems that perpetuate chronic poverty. The Report focuses, especially, on issues of insecurity and exclusion. The Report argues, powerfully and convincingly to my mind, that these are key problems affecting the very poor which public policy needs to address. Specifically, the Report identifies five main traps that underpin chronic poverty:

(1) Insecurity

(2) Limited citizenship (restricted “voice” in politics)

(3) Spatial disadvantage (living in areas that are “excluded”)

(4) Social discrimination

(5) Poor work opportunities.

If the approach of the report were adopted – and I’d argue that it should be — then both the international donor community as well as governments within developing countries in Asia would need to rethink quite a few current policies. The sooner the better.

1. Indonesia to grow at 8%?
2. Under SBY, Indonesia grapples with the issue of poverty
3. Markets and corruption in Indonesia

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!”

The main outcome of the APEC Finance Ministers meeting in Melbourne was a clear recognition that “behind the border” problems impose important restraints on international trade.   This is an important step forward.  However one wonders whether the APEC club fully appreciate what they are biting off by broadening the agenda in this way.  One hopes that they do.

The basic problem with widening the APEC debate to “behind the border” issues is that a considerable range of domestic economic policy issues are suddenly relevant.  And many of the issues are very difficult.  They include such things as competition policy, infrastructure policy, domestic regulatory issues, legal reform, capacity-building to handle these issues, and so on.  The truth is that a number of the ASEAN countries simply do not have the administrative or financial capacity to cope with a focus on these issues.  Rich APEC countries need to be very realistic in setting targets that APEC might reasonably attain.  More realistic than in the past.

1. Quiet but real progress in APEC in Singapore
2. APEC and structural reform
3. Good news and bad news on the APEC front

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.

One of the most important benefits of higher growth is that it helps greatly in tackling the dreadful problem of mass poverty. As Stephen notes, in Indonesia half the population lives on less than $2 per day. This means that like most other developing countries in Asia, Indonesia suffers from “mass poverty”. The type of mass poverty which exists in poor countries is a very different phenomenon to the poverty which exists in rich countries. And because the nature of poverty is different, the policy responses required are different as well.

In rich countries most poverty is localised and affects relatively small numbers of people. Targeted anti-poverty interventions are both affordable and often reasonably effective in rich countries. The situation is quite different in countries like Indonesia where mass poverty affects huge numbers of people. In poor countries, targeted anti-poverty interventions are of limited use because the basic problem (low national income per capita) affects the whole nation. Furthermore, governments in poor countries generally lack both the financial and administrative capacity to focus on specific pockets of poverty. Thus high growth, sustained for a long time, is needed to overcome mass poverty in Indonesia.

1. New ideas on chronic poverty for Indonesia
2. Markets and corruption in Indonesia
3. Under SBY, Indonesia grapples with the issue of poverty

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.

1. Indonesia’s energy challenge
2. Energy governance in Asia: beyond the market
3. Indonesia climate green paper: towards carbon pricing, geothermal power and regional incentives

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.”

1. Lessons for Indonesia from Thailand: Strengthen institutions before the crisis
2. Clinton’s visit to Indonesia
3. Markets and corruption in Indonesia