All of it. Probably the biggest single problem is transportation -- big cities like Jakarta and Surabaya are terminally clogged with traffic, and unlike Bangkok or KL there's no usable rail system to compensate.Cuchu wrote:In which profession/industry sector, you think Indonesia needs the most improvement? Why and what can be done to improve it?
I do. Really thank you for suggesting it even. Much appreciated.sundaymorningstaple wrote: Cuchu,
If you want to keep this thread serious, let me know and we will move it to the Strictly Speaking section as I think this could be a serious discussion. Your call.
sms
Can give the worst example you've seen by any chance?sundaymorningstaple wrote:It doesn't matter what industry/sector. The problem there is graft from the top eschelons down to the next to the lowest level. Graft exists at all levels in between. Having worked in Indonesia from Irian Jaya to Aceh and from Ternate to Kupang and most points in between over a period of 12 years I've seen it at all levels.
By Joe Cochrane
Newsweek International
Aug. 8, 2005 issue - Taufiequrachman Ruki suffers for his job. The self-effacing 59-year-old is Indonesia's corruption czar, charged with weeding out graft in one of the world's most corrupt countries. A former police general, Ruki must not only investigate and prosecute the many unethical businessmen, politicians and bureaucrats in Indonesia, but also turn down the many gifts they constantly offer him to look the other way—cars, houses, luxury goods. It's stressful, to say the least. "This isn't a job," he told NEWSWEEK. "It's a sacrifice."
Indonesia has shed its authoritarian legacy and is now the world's fourth largest emerging democracy. But the transition has been rocky. Thousands died in sectarian and ethnic violence after strongman ruler Suharto was toppled in 1998. President Susilo Bambang Yudhoyono is struggling to maintain social order while simultaneously trying to woo back much-needed foreign investment to create jobs for tens of millions of unemployed people. Corruption is arguably the country's biggest problem—siphoning billions of dollars from productive enterprises. In its latest corruption-perception index, Transparency International ranks Indonesia tied for 133rd out of 145 countries. In the past 15 months, voters have directly elected new local mayors, district chiefs and members of Parliament—and virtually all have vowed to fight graft. But skeptics say most of the election winners merely pay lip service to the issue and would rather maintain the status quo. "They're part of the problem," says H. S. Dillon, executive director of the U.N.-funded Partnership for Governance Reforms in Indonesia.
That makes Ruki's role crucial. In 2003, President Megawati Sukarnoputri appointed him as chairman of the newly formed Corruption Eradication Commission—even as some officials in her government were thought to be stealing money from the country. When Yudhoyono won the presidency last September, he vowed to ruthlessly attack state-sponsored graft. Yudhoyono, better known by his initials SBY, chairs his own anticorruption panel that oversees investigations and prosecutions by the attorney general's office. But critics say the latter has historically bumbled cases in exchange for white envelopes stuffed with cash. Ruki's commission is an independent agency that can only be dissolved by law. It handles big-ticket corruption cases, though it can take over any investigation or prosecution if it appears the matter is being swept under the rug. Like Yudhoyono, Ruki considers graft the country's top scourge. "I think more progressive and systematic steps must be taken, [such as demanding] more accountability of the leaders of state-owned companies," he says.
Ruki's staff of 42 investigators, auditors and prosecutors is currently handling corruption cases involving a former cabinet minister, officials from a major state-run bank and members of the National Election Commission. One of the election-commission members is on trial now. The office has an annual budget of $40 million, but the caseload is heavy, and Ruki says more money and investigatory manpower are needed. As the cases pile up, the group is being stretched physically and mentally. "I suffer from anxiety and depression," Ruki says. "I wake up in the middle of the night wondering if I'm going the wrong way on a case, or worrying that I can't find enough evidence."
The commission has one big victory so far. The former governor of Aceh province, Abdullah Puteh, was convicted of graft in April and sentenced to 10 years in jail. By pursuing high-profile officials, the government hopes the message will trickle down to public officials at lower levels. "People do think twice now," says former attorney general Marzuki Darusman. "If this continues and is sustained, we might be seeing the beginnings of a turnaround." One foreign shipping executive, who asked for anonymity because his company has been dunned for bribes in the past by Indonesian officials, says that the firm no longer has to pay "facilitation fees" to move cargo in and out of the Jakarta port. Expats report they now have to actually take a driving test to get a license, rather than paying a few dollars to "agents" hovering outside the motor-vehicles office.
Despite those encouraging signs, no one expects graft in Indonesia to disappear any time soon. The problem is too deeply ingrained in the culture. Shady politicians and businessmen have deep pockets and vast influence, especially within the country's notoriously corrupt courts. "You offer a judge making $300 a month $30,000 to make a favorable ruling, what do you think he's going to do?" asks one Jakarta-based attorney. Anticorruption groups howled in May when the attorney general's office dropped investigations into two companies linked to Vice President Jusuf Kalla and Economic Minister Aburizal Bakrie. Both officials assert that the companies did nothing wrong. Ruki admits that law enforcement in Indonesia "can never be totally [isolated] from political interference," adding: "We go after the big fish, but if the fish is too big, my commission could sink." With that, the harried public servant issues a deep sigh, shakes his head and goes back to work.
© 2006 Newsweek, Inc.
Like Tommy Suharto's Clove Monopoly? Or the Timber cartel? or for that matter, the Oil monopoly held by Pertamina? Developing is easy, keeping it out of one family's hands isn't. The only way to improve is to dismantle what is existing first otherwise they have too much power in a few select hands. The following link is rather old today but to give you an idea just how close knitted it is have a read.Cuchu wrote:Interestingly some were thinking that as what we have already as a niche, we probably can develop the rich natural resources we have, for example by improving the commodities trading, the commodities export-import, etc.
While it seems just one of a number of contributing elements of the troubled Japanese economy, the NPL problem lies at the root of Japan's economic stagnation, and must be addressed before any significant capital investment will materialize.
There are four steps that are essential to deal with Japan's NPL problem, and none of them is easy either economically, culturally or politically. Yet it seems unlikely that the NPLs can be fully eliminated--or that the Japanese economy can fully recover--without implementing all of them.
Adopt an Effective Accounting System
Japan simply does not have an accounting system that permits the identification of NPLs. In the US, an NPL is not just a loan that is no longer paying interest or principal. US bank regulators have long been aware that a loan should be classified as nonperforming well before the borrower actually defaults. A borrower may be able to meet its loan obligations by selling off productive assets, reducing product quality, or by failing to invest in new plant and equipment. Eventually, of course, the borrower will actually default, and at that point the lender may have few assets it can rely on for repayment. In Japan, it is even more difficult to determine the financial health of borrowers by considering only their ability to meet their loan obligations, since many Japanese bank loans are "evergreen," and are serviced only by the regular payment of interest.
Thus, it is impossible to determine whether a loan is in fact nonperforming without an effective accounting system--beginning with a set of agreed accounting principles and backed up by an auditing function in which auditors bear direct financial responsibility for failure to discover accounting deficiencies. But the accounting system utilized in Japan does not meet these standards. Although improvements have been made in recent years, some of the Japanese accounting rules are not determined by the accounting profession but by the Diet through the commercial law. Needless to say, the legislature cannot determine by law what is a true or accurate presentation of a company's financial condition. This may be adequate, or even necessary, for tax collection or for regulatory purposes of some kind, but in order to gain and hold the confidence of financial investors--or to create a true picture of financial reality--accounting principles and a resulting accounting system must be privately developed and administered.
Because of the weakness of Japan's accounting system, it is probably accurate to say that no observers in Japan--not the government, not independent analysts, not even the banks themselves--have a clear idea of the size of the NPL problem. That is why the numbers keep changing from month to month and year to year, and why--when bankruptcies actually occur--the losses are always so much greater than would have been predicted from the defunct borrower's last financial statements.
Accordingly, the first step in addressing the NPL problem must be the development of an accounting system that will be able to differentiate between companies that are operating profitably and those that are not. Until such a system is in place, the proper disposition of NPLs will always be something of a guessing game.
Obviously, an accounting system cannot be created overnight, although importing the US GAAP system or the International Accounting Standards used in Europe would enable Japan to leapfrog years of arduous intellectual work in other developed countries. But the absence of an effective accounting system complicates the task of resolving NPLs because it makes the problem of valuation much more difficult. Indeed, the first objection faced by those who recommend a rapid sell-off of NPLs is that their value cannot be established. This brings us to the second step for resolving Japanese NPLs.
Sell NPLs Promptly, at Whatever Price They Will Bring
In the absence of an accounting system that will assist buyers and sellers to establish values, NPLs must be sold for whatever they will bring. This can perhaps be done most effectively through auctions, with the widest possible world-wide crowd of bidders. The Internet may provide the most efficient way to accomplish this, permitting the selling banks to provide all the necessary bid-package documents to buyers electronically--establishing in effect an electronic document room on a server in Japan or elsewhere. If bidders are given sufficient time to consider the values involved--including the value of intangibles such as patents, trademarks or trade names--and if the NPLs are properly packaged in sets that offer diversification or other advantages to bulk buyers, the selling banks should be able to realize the maximum value from the sales.
This is not to say that, at the outset, the sale prices will approach the true value of the assets. The likelihood is that they will not. For one thing, without an effective way to estimate values, buyers will demand high risk premiums. For another, many potential bidders will stay out until they see how well the process functions. The first bidders, accordingly, as occurred when US regulators began selling off defaulted real estate loans, will get enormous bargains. However, these windfall profits will attract more buyers to the next auctions, and prices will eventually rise to levels that approach the real value of the assets. In order to create an orderly process, a government agency could sell the NPLs for the account of the banks, but it is essential that the resulting losses be the responsibility of the banks and their stockholders, and not the government. A bailout of the banks' managements and stockholders through the government assuming their losses will only guarantee similar NPL problems in the future.
Obviously, these sales will create political problems for the government. For one thing, the buyers of these loans will be seeking to profit by either closing down the companies that are or should be in default and selling off their assets or taking control of and recapitalizing them, reducing their costs, and seeking to return them to profitability. In either case, this will cause rapidly rising unemployment in Japan.
I have had government representatives in Japan tell me this simply cannot be done within the Japanese culture--that unlike the United States workers in Japan are not accustomed to changing jobs or upgrading their skills. The laid off workers will become a major social as well as a political problem. Although this sounds suspiciously like an excuse for inaction, I am obviously not in a position to contradict it. But if it is true, it is still not a reason to temporize. First, the slow deterioration of the Japanese economy that will result will hurt everyone, not just the laid off workers, and second, the laid off workers will eventually lose their jobs anyway. The policies the government has been following allows the banks gradually to close off support for failing borrowers--it's just a matter of time. If laid off workers are going to be a social and political problem in Japan, they will become one anyway if the government continues its current policies on NPLs--it will just happen more slowly and with greater damage to everyone else. This will also mean that any recovery--if it takes hold--will also be slower, because more of the economy will have been weakened. It would thus be much better for the government to get it over with quickly, get the economy moving again, and hope that a growing economy will quickly re-employ those who have been laid off.
In addition, to add to the political problems, the bargains realized by initial buyers, including foreign buyers, will set off complaints from taxpayers, who know that eventually they will have to bear the cost of these losses, and from those who object to foreign ownership of Japanese assets. There is no good solution here; if, as is likely, many banks are insolvent after the sale of their NPLs, their losses will have to be covered somehow. The question is whether that cost is borne by the taxpayers or the private sector. When US regulators faced this problem in the late 1980s and early 1990s, their frequent choice was to sell the banks themselves, often together with their nonperforming loans, and to provide assistance to the buyers that would compensate them in part for the losses already imbedded in the balance sheets of the institution they were acquiring. In this case, the taxpayers at least realized some of the going concern and other values imbedded in the failed institutions.
However, since the likely acquirers of the Japanese banks will be solvent foreign banks or other foreign institutions, this is probably not a policy the Japanese government will want to pursue. Neither Japan nor any other country wants to have its banks controlled by foreign interests, so the best policy for Japan would be the sale of the NPLs and their associated assets, with a temporary government takeover of the banks in the event that they become insolvent. This will reduce the ultimate cost to taxpayers, and--as described below--save the banks as Japanese-controlled entities.
Recapitalize the Banks
By selling off their NPLS at distressed prices, many banks will become insolvent. This is probably the principal underlying reason that the Japanese banks and the government have made no aggressive moves over the years to follow this course, with a resulting depressing effect on the Japanese economy as a whole. But, if handled properly, bank insolvency is not an insurmountable problem.
Faced with a substantial number of potentially insolvent banks, the government should make clear to depositors that it will recapitalize the banks and honor their obligations. Although the stockholders of insolvent banks will lose their investment, depositors should stay in place because of the government's commitment. Again, the US experience provides a useful model. In the United States in the late 1980s and early 1990s, despite widespread knowledge that many banks and thrift institutions were insolvent, there were few if any depositor runs as the government gradually closed failed of failing banks. US depositors understood that if the bank or thrift in which they held their funds was declared insolvent the government would honor the obligations represented by their deposits. With a sufficiently clear government pledge, the same calm should prevail in Japan.
To be sure, this course contains some significant risks. Assuring depositors and other bank creditors that the bank's obligations will be honored by the government will create moral hazard if it is understood by depositors and creditors to be a permanent government policy. It will be important for the government to make clear that this step is a temporary expedient--necessary to address the NPL problem--and to back this declaration with a statutory limit on the size of the deposits that financial or regulatory authorities are authorized to reimburse in the future. One of the reasons for the development of the NPL problem in the first place was the absence in Japan of the market discipline that comes in part from a concern by bank depositors and other creditors that their investments will be lost if a bank becomes insolvent. Up to now, the Japanese government's policies have encouraged depositors to believe that their deposits will be protected by the government, and this has eliminated whatever market discipline depositors and creditors might have exerted on Japanese banks.
In recapitalizing the insolvent banks, the Japanese government will become the controlling stockholder of the insolvent banks. Having taken control, the government should install new management, new accounting systems, and new operating standards. When the banks are operating profitably again, all the government's shares should be sold off to Japanese investors, a process through which the government will be able to recoup some of the money it invested in the banks' recapitalization. The healthy banks that have then been reintroduced into the private capital markets should be able to operate profitably over the long term.
Sell the FILP Assets
The private sector Japanese banks are not the only repositories of NPLs in the Japanese economy. The Fiscal Investment Loan Program (FILP) operated by the Ministry of Finance has invested more than Y414 trillion ($3.35 trillion at Y120=$1) in government owned or controlled companies, most of it over the last 10 years. Needless to say, this enormous investment--made principally with the savings of Japanese citizens in the Postal Savings System (58%) and the Public Pension System (33%)--has not revived the Japanese economy. Indeed, it can be argued that the squandering of these funds on uneconomical infrastructure projects--bridges, roads, housing and airports among many others--has actually held back economic growth.
What seems clear is that a large proportion of the loans made to the FILP companies are nonperforming. Recently, a group of experts reported to MOF that they thought the NPLs in the FILP companies totaled at least $91 billion. Because of the deficiencies of the Japanese accounting system, it is likely that the total is much larger. These NPLs, too, must be sold, and the FILP companies themselves--except to the extent that they are performing actual government functions--should be privatized. Again, private investment will not materialize as long as subsidized assets overhang the market, or private capital must compete with government-subsidized capital.
The most important result of all these moves, difficult as they are, will be the elimination of the NPLs that are today impeding private investment in the Japanese economy. Once the assets that now overhang the market have been assigned a realistic value and placed in private hands through sale, new capital investors will materialize and the Japanese economy will begin to grow again.
Well, it's a question of priorities and commitment. I applaud SBY for slashing the fuel subsidies, which were an incredibly huge waste of money (not just the money spent, but the consequent distortion that prevented investing more into oil production and tilted the playing field in favor of private cars), and I also applaud Sutiyoso for getting the busway (TransJakarta) off the ground and growing despite the grumbles of the black SUV brigade.Cuchu wrote:jpatokal, I wonder if the government has enough budget, technically qualified manpower nor the resources to build a railway system or the metro system inside the city for example.
i remembered when they started the a/c bus - i was happy that there wasn't a conductor inside and that everything was nice.jpatokal wrote: There's also a much, much cheaper way to make Jakarta's public transport more efficient -- invest a fraction of the monorail's cost into beefing up Jakarta's commuter train system, which already has right of way, stations, communities built around them, etc. But no, it's not sexy, so it ain't gonna happen.
I like this term. It is the central teaching of Confucianism. Reason China, as a country, failed so miserably in the last century was due to a departure from this concept, people at the top of the organization should always act with benevolence and do what benefits the social group, not for self-glory or self-interest. Benevolence had always been the benchmark that Emperors had been judged by the brushstrokes of historians throughout the dynasties.DimWit Kid wrote:To drive China-style economic reform you need some benevolent dictatorship (well, I am not sure whether benevolent is the right word, but I hope you get what I mean) that can force the political will to direct the economic reform to the right path.
The parallel is scarier than you think. Indonesia had "benevolent dictatorship" for several decades under Suharto, and progressed by leaps and bounds under that time -- or at least some parts did. Others didn't, and they eventually brought the shiny edifice of progress crashing down. China is facing the same problem with its rich/poor divide and rapacious corruption, and having the same ugly ending in China is entirely possible.DimWit Kid wrote:Indonesia, for better or worse, has become more democratic. Probably, it is better to have a "benevolent dictatorship" of some form rather than half-cooked democracy. As a model, China... if you begin there with political reform, instead of economic reform, I don't think they would be where they are right now. To drive China-style economic reform you need some benevolent dictatorship (well, I am not sure whether benevolent is the right word, but I hope you get what I mean) that can force the political will to direct the economic reform to the right path.
Call me an optimist, but I actually think that Indonesia is slowly moving in the right direction, and the economic data for the past few years seems to bear this out. Indonesia today is where Thailand was a few decades ago, and while things are far from perfect in either country, it has the potential to keep advancing along the same path.To mitigate the backlash, one has to progress slowly, to the RIGHT DIRECTION.
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