New Ash Center Report Lauds Successes, Proposes Reforms for Indonesia

August 30, 2010
New Ash Center Report Lauds Successes, Proposes Reforms for Indonesia

Recommends Key Areas to Enhance Political, Social, and Economic Progress

Cambridge, Mass. – Formerly an authoritarian state, Indonesia has made impressive gains over the last 10 years as the world’s first majority Muslim, multi-party democracy. The country’s successes and challenges as a new democracy are the subject of the new report titled “From Reformasi to Institutional Transformation: A Strategic Assessment of Indonesia’s Prospects for Growth, Equity, and Democratic Governance.” The report, authored by the Rajawali Foundation Institute for Asia of the Ash Center for Democratic Governance and Innovation at the John F. Kennedy School of Government at Harvard University, offers an assessment of Indonesia’s governance and socioeconomic climate, and concludes that the country must move beyond current reforms to effect a dramatic institutional transformation in order to compete successfully in the global economy.

Indonesia’s current economic and social conditions are described in the beginning of the report. It documents the nation’s struggles with inequality, corruption, and institutional failure, and outlines the many economic challenges that it faces, including a growing trade deficit with China, the continued exporting of its natural resources and the importing of many finished goods which could be produced domestically. According to the report, slow job growth coupled with inadequate infrastructure and public health services impede Indonesia from achieving its full potential.

Recommendations for Reform
The report’s authors contend that the following short- and medium-term measures could set Indonesia back on the right course toward a path of prosperity:

      • Electoral Reform: Indonesia’s current election processes vary across the country and are often plagued by corruption. Solutions like creating a single-member district (SMD) system and semi-closed list voting processes, or adopting Germany’s mixed SMD and closed-list system, could reduce the complexities and thus curb some corruption, incentivizing politicians to act more in the public interest.
      • Adopting International Standards: China has had much success attracting foreign business by adopting international standards of accountability and transparency while involving international executives and board members. By following China’s example, Indonesia could make a stronger commitment to international rules and halt business-as-usual practices influenced solely by domestic interests.
      • Reforming Decentralization: While decentralization has increased avenues for democratic participation, its speed and lack of coherent functions threaten to undermine its civic benefits. The report calls for inter-governmental review bodies, such as the Council for Deliberation on Regional Autonomy, to improve efforts in overseeing and coordinating decentralization. Creating a clear set of standards and criteria for the establishment of new administrative entities could provide much needed consistency and accountability of functions.
      • Legal and Judicial Reform: Despite recent legislative attempts to reduce its power, the Corruption Eradication Commission (KPK) has been successful in prosecuting many prominent, corrupt politicians and business people. Moreover, recent public outcries against corruption demonstrate that the public is eager for much-needed reform. The report argues that such public dissatisfaction with corruption needs to be channeled into larger NGO watchdog groups, which would in turn give people more of a stake in their democracy’s ongoing stability.
      • Finding the “Missing Middle”: With over half of the country’s population living just above the poverty rate, Indonesia has a small middle class by comparison to other countries. To increase this “missing middle,” the report suggests expanding access to public education and removing paralyzing labor laws and restrictions that prevent the growth of stable employment. Other suggestions include increasing access to electricity and enhancing necessary social services for elderly and disabled.

“The achievements of Indonesia’s Reformasi era are important and lasting,” said Anthony Saich, director of the Rajawali Foundation Institute for Asia and the Ash Center at Harvard Kennedy School (HKS). “But the country must move beyond changes to the formal set up of its institutions to undertake a substantive institutional transformation, and it must do so quickly to make the most of globalization and avoid the pitfalls of heavy dependence on natural resources and low-wage manufacturing.”

The report is part of a larger initiative at the Rajawali Foundation Institute for Asia’s HKS Indonesia Program to expand and strengthen policy research and educational programming in Indonesia. The Program is sponsoring HKS faculty research on crisis management, economic inequality, and energy policy along with a number of other pertinent topics of interest to policymakers in Indonesia. In addition, the HKS Indonesia Program is developing a series of executive education training programs for government officials and academics, and supporting student fellowships related to research on Indonesia.

View a full copy of “From Reformasi to Institutional Transformation” here or at the Ash Center website. Led by Anthony Saich, this report was authored by David Dapice, Tarek Masoud, Dwight Perkins, Jonathan Pincus, Jay Rosengard, Thomas Vallely, Ben Wilkinson, and Jeffrey Williams. A translation of the report by Kompas Publishing Group will be sold at Gramedia bookstores in Indonesia this month.

About the Ash Center for Democratic Governance and Innovation
The Ash Center for Democratic Governance and Innovation advances excellence in governance and strengthens democratic institutions worldwide. Through its research, education, international programs, and government innovations awards, the Center fosters creative and effective government problem solving and serves as a catalyst for addressing many of the most pressing needs of the world’s citizens. Launched in 2010 through Rajawali Foundation support, the HKS Indonesia Program promotes research, education, and capacity building in support of democratic governance and institutional development in Indonesia. For more information, visit www.ash.harvard.edu.