Indonesia and the Philippines compared

The apparent reelection of Joko Widodo as president of Indonesia in the presidential election prompts me to look back at the long-term historical trajectories of both Indonesia and our country until today.

There are interesting aspects of this comparison, especially in relation to our past history. The past provides useful perspectives from which we can judge the course of nationhood.

At the advent of our respective political independence, we were economically far ahead of Indonesia. By the mid-1980s, they have outstripped our economic performance.

We should really have done much better than they. Today, there are so many more smart Filipinos working and contributing to Indonesia’s economic progress.

Need for strong and unified government. Indonesia’s government has always had a powerful executive. Today, the Philippines operates on a system of checks and balances that appear to function in checking the executive more.

The Philippines needs a strong central government to push for economic development. Through that institution, it can expedite the building of social and economic infrastructure that the country sorely needs. Of course, it also needs a wise leader.

Strong institutions are a must. But these have to be supplemented by economic policies that are friendly toward economic development. In two areas of economic policies, Indonesia has succeeded better than we have.

Economic policies.  Indonesia has done much better in inviting foreign direct investments than we have. It is not that Indonesia is any less nationalistic than Filipinos. In fact, at one time, they were as difficult in inviting foreign investments.

Constitutional permissiveness vs. restrictions.  Indonesia’s legal regime for investments is permissive. The Philippine legal regime is constitutionally restrictive.

Indonesia was never delayed or conflicted with complex constitutional rules about how to treat foreign direct investments in their midst because they never instituted those rules in the first place.

In the case of the Philippines, constitutional restrictions on foreign investments have paralyzed our efforts over the years in three major areas – public utilities, natural resources exploitation, and land ownership. Further, these provisions have given birth to many nationalistic rules that further hampered foreign investment attraction.

In the mid-1970s, we adopted the Indonesian model of inviting foreign capital in the development of our natural resources. The government allowed fully-owned foreign companies to participate in natural resources exploitation in joint venture with the government. We discovered oil as a result.

Then the government got stopped by constitutional challenges on this issue after the 1980s. The courts sustained this law only in the year 2005, causing much economic opportunity to be lost.

The constitutional restrictions in the Philippine setting have encouraged other restrictions that have complicated foreign investment attraction. These provisions continue to hamper performance in this regard.

Labor and population policies. I have written so much on this issue in this column.

Indonesia has adopted the East Asian solution to minimum wages since decades ago. As a result, there are many Indonesian laborers now riding motorcycles, having better housing, their children going to school.

Indonesia’s population is 260 million and ours is 105 million. But Indonesia’s population grows at about one-half the rate of the current Philippine population growth.

Indonesia’s lower population growth rate has been due to a conscious population planning program. Our policy in this respect is less established than the Indonesian program. 

The economic meaning of these growth rates suggests that a one percent expansion of the nation’s output would benefit the average Indonesian more than the average Filipino. The Indonesian income earner will support fewer children than the Filipino.

Indonesia’s respect for past leadership accomplishments. Philippine politics has been too internally fractious, too divisive so that we try to denigrate the achievements of past leaders and erase their legacy. We can learn from the experience of Indonesia.

The Indonesians also have their divisive politics during elections. But no leader has really been known to try to destroy the legacy of the previous leader.

When Suharto succeeded Sukarno, he put him on a pedestal by crediting him with gaining independence. He did not vilify his name through the mistakes he had caused Indonesians to suffer.

When Suharto himself fell from power, weakened by economic crisis and charges of corruption and weakness and all sorts of vilification, his successors gave him a place of respect and retirement and built on his enormous achievements.

What Suharto did was consolidate Indonesia further, he stabilized Indonesia’s hyperinflation and restored responsible macroeconomic management. He also slowly rebuilt the nation’s domestic economy. And in 1987, in spite of himself, he advanced economic reforms which were needed to improve international competition for Indonesia.

All leaders will encounter problems that are difficult to solve because some circumstances are beyond their control. But a nation-building moves forward when succeeding leaders build upon the achievements of their predecessors even when they redirect the future.

The steady progress of Indonesia between transitions of leaderships has been sustained because of this respect for the contributions of previous leaders who were not themselves blameless.

Our lost decade in the Philippines. The misfortune in our country is that in the course of the leadership change in the mid-1980s, a systematic effort was made to erase or to demonize the economic achievements of the past leader.

This effort has led the country to a lot of dislocations, causing the whole economy to suffer. That was a decade of lost opportunities.

This, of course, opens up a debate that continue to persist in the nation today: Who is to blame, the past or the present?

This question continues to divide us Filipinos rather than unite use in the pursuit of economic development.

My email is: [email protected]. For archives of previous Crossroads essays, go to: https://www.philstar.com/authors/1336383/gerardo-p-sicat. Visit this site for more information, feedback and commentary: http://econ.upd.edu.ph/gpsicat/