Sunday, December 26, 2010

My dream end-of-year presidential speech

Dear my fellow countrymen,

We soon will say goodbye to 2010 and hello to 2011. As the president, I'd like to make a little reflection on the foregoing year while also share my expectation of the year to come. We entered 2010 with a big expectation. In fact we survived the global financial crisis rather impressively, along with China and India. But that is no excuse to be working less. This year we have seen other - almost all, I should say - countries recovering very well. On the other hand, we also continued growing - but somewhat slower. It's not that we had not expected such growth rate. Given our current situation, it is still hard to achieve the potential rates as we did before the Asian financial crisis.

Which leads us to the question: what is really the constraint? I am aware that we still have numerous problems and issues on the table. But we should prioritize. If I were to pick up, say, the two most binding constraints to growth, that would be high logistic costs and very rigid labor market. The former deals a lot with infrastructure provision - both soft and hard infrastructure: so not only the roads, ports, and bridges but also the system and human resources thereof. As for the labor market, we have yet to settle a mutually benefiting labor law to employers and employees. As a result, businesses are reluctant to hire more workers on permanent basis while workers have few choices other than accepting unfavorable contract terms or else move to informal sector whose job security is minimal.

We have done many things regarding these two problems. But certainly not sufficient. Infrastructure development will continue to become the main theme. It involves among all, completing the trans-roads and the 10K megawatt electricity, improving the ports and their national single window system as well as refining the public-private partnership schemes. The latter is crucial as we know the government capacity to finance the needed infrastructure development is only 30 percent.

As for the labor market issue. I know this has always been very sensitive. We tried to make a revision in 2006 but it failed. Apparently we need to work harder together to resolve this issue. Otherwise, the labor movement between sectors (including formal-informal) and across regions (including urban-rural) will remain hindered. We also need to reduce barriers at the border. This includes negotiation with other countries on job safety for our migrant workers. In addition, we should be ready to anticipate foreign demand for our workers. Otherwise, we can not reap the opportunities out there: China's labor wage has increased and some companies therein have started to look for other countries to relocate. Japan is having a serious aging problem: their old yet rich population need young, productive workers that the country lacks. We have them.

Those are the two most important factors of our development at the moment. They are rather short term with regards to policy. Meaning, the approach to tackle them should be implemented as soon as possible in order to switch to the higher gear. That is to say, we also have long term problems that need structural - and continuing - solution or approach. In my view, it is and will always be human resource. While I am proud to see young Indonesians ace international competition, in general we still need to improve the quality of our people. That requires sustainable improvement in health and education.

One might ask, where is the poverty issue? Well it is in all of the above. Improving infrastructure will open more economic options to the poor in the remote areas. Making the labor market more flexible allows more hiring and many of those in informal sector can move to the formal one. Improving health and education is by default directed towards the poor as top priority.


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