Foreword: Lessons for Indonesia from East Asia

Summary

I am pleased to be able to write the Foreword for this important and timely book on the Indonesian economy. As we know the country is currently entering the five-yearly elections cycle that will set the political stage for the subsequent five years.

The book aims to shed light on whether Indonesia has presently embarked on a new development model. In this piece I would like to share with you my reflection, inevitably quite subjective, on a related but somewhat narrower issue. The question I am going to raise is what Indonesia could learn from the experience of the East Asian countries. I will relate it to the changing environment of policymaking in Indonesia in the past six decades or so, half of which time I had had the privilege to observe the process from the ring side, so to speak, and subsequently found myself increasingly drawn into the ring. I will conclude with a tentative suggestion on how Indonesia could improve its policy performance in the coming years.

Let me begin by clarifying what I mean by the East Asian countries. In this group I include Japan, Taiwan, South Korea, Singapore, Hong Kong and, more recently, China and now perhaps also Vietnam. This group in my view is unique because in their quest for development they carried out similar strategies with similar outcomes.

I am aware that within that group individual countries differ in their experiences and in their specific policies with regard to their important sectors such as industries, trade and finance. Nonetheless, we can readily identify some basic commonalities in their approaches to development. For the purpose of this talk I will pick two of them.

The first is this. From the early stages of their development these countries consistently placed high in their agenda the upgrading of three strategic areas, namely, education, bureaucracy and infrastructure. The first two — education and bureaucracy — have roots in the Confucian precept about the basic role of the state, while the third is an enabling element. The pursuit of these three objectives constitutes a crucial part of their development stories.

Their strategy emphasizes the “supply side” development with the goal of progressively raising the country's “productive capacity”. In the literature three factors, namely, human resources, institutions and infrastructure, have consistently stood out as prime determinants of a country's development in the long run.