Differential equity and/or a moral renewal 1997-11-20 As Indonesians begin to ponder the full implications of the economic difficulties they
now confront, they will begin to look for reasons as to why the economy imploded.
This report reviews possible conclusions that parts of the community may reach. This
has important social and political ramifications should these conclusions lead to
follow up demands for reform.
To put the economic crisis in its full perspective, I believe there can be do doubt that
the current difficulties surpass any of the challenges met, and overcome, during the
past 27 years. This means that the current problems exceed those which:
• accompanied the tight monetary conditions in the wake of financial deregulation in
the late 1980s;
• followed the collapse of oil prices in mid-1986 which led to the collapse of the
Government's main revenue source and the country's major source of foreign
exchange;
• arose from having to manage the macroeconomic fall out from the oil price booms
of the mid and late 1970s;
• followed the revelation of the scale of debts accrued by Pertamina by 1975.
Reaching back to this point in time, therefore, takes us back to the early years of the
New Order.
Under conditions in which the country's economic fundamentals have been so
significantly undermined, it would therefore be rather Pollyanna-ishly optimistic, if
not folly, to assume that Indonesia's social and political fundamentals will remain
unchanged1.
What are the likely fault-lines, which could be pried opened by the economic
pressures now bearing down on the community? To gain a better insight, I should
detail the current causes of the economic pressures and how people are being affected.
Indonesia is currently suffering from 2 pairs of problems, a quadruple wammy!
The first two relate to currency and finance markets. In many respects these two
problems shattered 2 core assumptions which have underpinned Indonesian (and other
regional) growth centres over the past few years.
These assumptions were that the world would continue to pay for Indonesia's excess
consumption (revealed through the current account deficit) without a currency
correction, and second that the financial sector (local and foreign) would be willing
and able to continue rolling over short term loans for long term investment projects.
Until the end of July, both assumptions held firm. {This report was for me the first serious attempt at trying to consider where the crisis
would take Indonesia. At the time I do not think the term Reformasi had yet been
popularized. In my mind the term to describe this need for renewal would be
“pembaharuan”, rather than the bastardized English term reformasi that did emerge.
In my view the depth of suffering that would occur through this emerging crisis was
such that people would be forced to engage in some kind of introspection as they seek
to understand just why they were being affected like this. Under such circumstances
it would seem normal that people look to moral (or perhaps ethical) answers to
understand and then redress these problems. In the case of Indonesia the answers
would, of course, be sought most substantively through Islam as the religion of the
overwhelming majority of the population.
The footnotes in this document were added on 31 December 2006, as I reviewed the
original document – all with the comforting distance of almost 9 years of hind–sight!
The comments are intended to provide both a little historic context that may now have
been forgotten with time and also to provide some auto–criticism of where I believe
my analysis was flawed or perhaps biased. From the original document I have also
corrected typing mistakes and grammatical errors without changing the integrity and
substance of what was initially written. The footnotes therefore do not represent part
of the original document.}
