5 Oktober 2010

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New Order ` KKN ` Rent-seeking activities for generals, senior officials and their business cronies in the oil and forestry ` Policy-generated barriers to domestic competition and trade that raised serious competition problems ` Influence of economic technocrats was reflected in lower fiscal and financial discipline, as indicated by rising off-budget expenditures

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China vsIndonesia ` Rapid and sustained growth

Chinas ability to sustain its reforms over long periods Indonesias reform process proceeded in several waves of radical measures, followed by periods of back-tracking.
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Reform
China: Ability to develop domestic capacity in designing homegrown reforms suited to its conditions. Indonesia: By a few competent economic policy-makers supported by outside advisers (including the World Bank, the IMF and the Harvard Institute for International Development)

Avoid rent-seekers and concentration of power

China: Building institutions within party and government to check power abuse. Indonesia: Concentrated in one, unsustainable institution

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Lesson learned ` Change the system: Altering incentives and ownership, i.e. shifting the economy from near total state ownership ->private ownership ` Open the door: Liberalizing trade and direct investment(FDI), dismantling most administrative controls, but not to portfolio flows. ->maximizing capacity building for workers and firms ` Develop high quality infrastructure: transport infrastructure&power supplies ` Careful attention to agriculture and rural development
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