Should Air Ticket Prices Be Regulated?

published @ The Jakarta Post

Low cost carriers (LCC) are an innovation of value in serving airline customers. Some customers value convenience, but others value low prices, especially for short-distance flights. This market niche has been well-filled by some airlines. To cut the price, a no-frills service is given.

Following the crash involving prominent LLC AirAsia, the Transportation Ministry is to set a minimum fare for air travel tickets. This policy will require that companies charge no less than 40 percent of the price ceiling. The basis for this policy is the argument that LCC neglect safety, jeopardizing passengers. But is it true?

Data reveal that the link between ticket price and flight safety is extremely tenuous. LCC know very well how to manage low margins in this highly regulated business. Ridiculously, a director at the ministry wondered how LCC could sell tickets for only Rp 10,000 (79 US cents) for the Jakarta-Medan route (The Jakarta Post, Jan. 8, 2014). To him that’s impossible.

He forgot that low prices are simply a marketing strategy. LCC do not sell all their seats at such low prices, and, of course, not all the time.

Such an impossibly low price is intended to prompt hype in order to spread the LCC brand. As a result, the load factor (the number of passengers compared with seats available) will be high, and the airline still has a good margin because of its economies of scale.

LCC are created by entrepreneurs pursuing profit; don’t teach the fish how to swim.

This would-be regulated minimum price will also aggrieve consumers. For the last decade, people have enjoyed travelling throughout the archipelago by plane because of these cheap prices.

Another concern is that the regulator will have no idea or control whether the funds from the increased price will be allocated for safety measures or simply for profit.

Worse, if the minimum price has been set and in the future – hopefully never — a plane crash occurs, then this policy will have been pointless and disadvantageous to all stakeholders.

But without regulating minimum prices, how do we address safety issues?

The responsibility lies with the Transportation Ministry. Instead of setting a minimum price, it’s better to issue strict regulations for flight safety. Plane maintenance, weather data provision, operation audit etc: the regulations must be put in place. LCC must comply with regulations. As long as all safety regulations are fulfilled by airlines, then the safety of the plane must be left to The Almighty.

The policy of minimum price definitely barks up the wrong tree. The focus should be on strict regulation, certificates of safety and good supervision. After that, let the airliners compete, and let the customers decide and enjoy the low prices.

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Democracy in India and Indonesia

published @ The Jakarta Post

India and Indonesia are regarded as the world’s largest and third-largest democracies respectively. India and Indonesia have many similarities. Both declared independence at relatively the same time and each founding father, Jawaharlal Nehru and Sukarno were co-founders of the non-aligned movement. Both have large populations and social diversity. Both are still developing and still grappling with poverty, red tape and inadequate infrastructure.

The differences are India has embraced democracy since its earliest days, while Indonesia achieved it in 1998 after toppling president Soeharto. In terms of economics, Indonesia under president Soeharto‘s administration was touted as an economic miracle. India’s economic growth has been anemic for decades. Nehru’s legacy was opting for centralized development planning. Amid the financial crisis in the 1990s, India, led by then prime minister Narasimha Rao and then finance minister, Manmohan Singh, started reforming the economy and moving to a market economy.

It is worth noting that in India a state is managed by a party and led by a chief minister. Through economic surveys, each state’s performance is publicly announced. Each party boasts about the best performance of states under its rule. So, before elections Indians have references on a political party’s performance. The party hardly promises anything beyond reality.

In a similar vein, Indonesia has been under President Susilo Bambang Yudhoyono’s (SBY) administration for 10 years. The best he gave us was stability in economy and politics. The economy has grown by around 5 percent during his two terms, which brought Indonesia into the G20 as a country shaping the global economy. And there has been no significant turmoil in politics. However, his administration has been tainted with corruption scandals implicating the top brass of his Democratic Party.

Thanks to democracy Indonesia has also given birth to a new leader. To many people, Joko “Jokowi” Widodo was seen as the best choice to replace SBY and bring Indonesians to prosperity. Like India’s Modi, his meteoric rise started from the success in managing a municipality, Surakarta. He made many breakthroughs in the economy, infrastructure and public services through a hands-on approach.

Later, this achievement brought him to lead Jakarta and ultimately to lead Indonesia. To this point, Indians and Indonesians have got the leaders they wanted. However, India and Indonesia have different political systems. Under the parliamentary system, Indians know exactly what party to vote for if they want Modi to be prime minister. And in the last general election, the BJP-led coalition swept the parliament.

In contrast, Indonesia subscribes to a presidential system with the result that legislative elections do not necessarily correspond with the presidential election. The Indonesian Democratic Party of Struggle (PDI-P)-led coalition who managed to secure Jokowi’s presidency got fewer seats than those of the opposition coalition. The debacle begins.

Even before the new president is sworn in the opposition is trying everything to show their force in controlling legislation and trying to hamper all the executives’ policies. The amendment to the law regarding the House of Representatives leadership is a case in point.

As an Indonesian, I am very envious of the Indians. In India, the fierce rivalry during the general election has completely stopped as the loser has given way to the winner. And the newly established government has started working with full confidence and support. In Indonesia, the future looks grim and uncertain. The fallout of the presidential election still exists and, sadly, Jokowi’s administration – instead of working to catch up with the progress of other developing nations – has to start quarrelling with the House about many issues for the next five years.

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Wrong debate on local election bill

published @ The Jakarta Post

Recently, the Red-and-White Coalition led by Prabowo Subianto has been making trouble again. They are trying to re-enact the election of local leaders through city/district councils instead of by direct election. Their intention is loud and clear. Their combined representatives dominate the councils, so they have the biggest chance of retaining the regional top jobs all over Indonesia. The coalition’s hidden motive is to exact revenge for losing the presidential election. However, their move, which jeopardizes Indonesia’s nascent democracy, must be stopped.

The main reason is that with power in the hands of councilors, prior to local elections, leadership candidates will meekly focus their efforts to appeal to the councilors instead of the people. This is susceptible to bribery. And after the election, the new leader will serve and please the powerful councilors rather than the powerless people.

The interests of councilors are very different from the interests of the people. The former pursues the enjoyment of power while in contrast the latter wants the best public service. And the facts show that the much-admired leaders such as Joko “Jokowi” Widodo, Ridwan Kamil, Tri Rismaharini, Nurdin Abdullah are the ones who deliver results and are directly elected by all the people.

Due to the recent maelstrom of debate, the substantial matter of regional autonomy needs be given priority. The debate should not be whether a leader is selected through direct election or not, but it must be at what level regional autonomy applies.

Ryaas Rasyid, former regional autonomy minister, once cited the overlapping of authority among governor and regents in one province. In fact, the governor has no “real” authority in the province, since the regents have already ruled on the regencies in the province. He said it was a waste that a governor had technical offices such as public works, health etc., which were matters that were already managed by regencies. So it would be better if the real debate on local government revision, including elections, was this overlap. There are at least two options available, namely autonomy at provincial level or at regency level.

If regional autonomy lies at regency level, then the services to people are wholly provided by the local government of the regency. The governor must not have technical offices and not be elected by people but be appointed by central government. The real function of a governor would be to represent central government in the province.

If regional autonomy is handed to the provincial level, then the power goes to the governor. The governor will be elected by the people and be held responsible for providing public services. The regents will be appointed by the governor and serve as the area managers to implement the governor’s policy. Some have rejected this structure because it resembles federalism which is stigmatized in Indonesian politics.

This is the crucial matter that should be debated and solved. It definitely concerns the effectiveness and efficiency of local government. And to join the fray, I propose that regional autonomy should stop at the provincial level.

Jakarta is the best example of autonomy at the provincial level. The governor is directly elected by the people, while all mayors are appointed by the governor. And Jakarta is a big province in terms of population and so far this system has worked.

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Bukittinggi: The Town That Killed Colonialism

published @ The Jakarta Post

Pramoedya Ananta Toer, Indonesia’s most remarkable writer, once wrote a piece entitled The Book that Killed Colonialism. In it, he stressed the importance of Eduard Douwes Dekker’s 1859 novel Max Havelaar, which highlighted the misery wrought on Indonesians by the policy of forced cultivation. This book energized the liberal movement in the Netherlands, eventually leading to new, more ethical colonial policies, including Western education for Indonesians. 

Well, if a book can kill colonialism, then why shouldn’t a town be able to? That town is Bukittinggi. The back-story is the coffee trade and the scene is the Padri War.

Since the advent of Westerners arriving in West Sumatra, coffee as an export commodity had been thriving. To begin with, the Dutch held sway only in Padang and the surrounding coastal area. The coffee plantations were far inland. Then the Padri War broke out.

The war was ignited by a group of Wahabi-inspired clerics, recently returned from the Middle East. They insisted on the brutal implementation of fundamental Islam in the Minangkabau region. However, the clerics met resistance from traditional chiefs called the Kaum Adat. The war raged for decades.

In 1821, the embattled Kaum Adat asked for support from the Dutch in Padang. The Dutch were keen to help in order to safeguard their coffee supply chain and to gain power in areas where coffee was grown.

To strengthen their military position, the Dutch built the Fort de Kock in 1833 in the middle of the Agam plateau; the local Agam people named this colonial town Bukittinggi. The Dutch defeated the clerics in 1837.

To boost the economy, using the export of coffee as the backbone, the Dutch built infrastructure including schools and coffee warehouses, and trained locals to run the coffee-related businesses as well as the administration of the local government. The Minangkabau people were dragged into the modern era, giving birth to a class of Dutch-speaking local teachers, civil servants and intellectuals. This class and its offspring would later play a leading role in Indonesian independence.

A notably large proportion of Indonesian intellectuals involved in the struggle for independence were in some way related to Bukittinggi and nearby Koto Gadang, including Bung Hatta (1902-1980), Abdul Muis (1883-1959), Tan Malaka (1897-1949), Agus Salim (1884-1954) and Sutan Sjahrir (1907-1966).

Bung Hatta was a co-founder of the nation. Along with Bung Karno, he proclaimed and signed the declaration of Indonesian independence in 1945.

Tan Malaka was an underground fighter and a prolific writer. One of his books, Madilog, is still widely read. He also had the first clear vision of the country’s future, in 1925 writing an essay entitled Toward the Republic of Indonesia.

Both H. Agus Salim and Abdul Muis were activists in Sarekat Islam, the commercial-turned-political organization that spread nationalism all over the archipelago. Sutan Sjahrir was the first Indonesian prime minister. He played a key role in the 1946 Linggarjati agreement — the first negotiation between the Dutch and the formally declared Indonesian nation.

The Minangkabau people and their culture maximized the hidden benefits of Dutch rule, at least in part resulting in a consequence unintended by the colonialists: Indonesian independence.

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RI's Democracy Homework

published @ The Jakarta Post

Democracy is a system to form a governing institution and its leader for a certain term through regular general elections. The underlying idea is to get wisdom from the crowd. However, effective democracy needs several intertwined conditions, including a relatively high-income society and a rules-conscious society.

People’s prosperity is the cornerstone of democracy. Psychologists know well that people who lose their wealth suffer more, as compared to long-time poor people. So, the richer the people, the more rational they will be. They will apply freedom hand in hand with obligation. They will not endanger their good lives by not participating in forming a legitimate government. Some experts suggest that democracy runs better in a country with a per capita income of more than US $10,000 a year. That’s why in earlier years suffrage was only for the rich and land owners.

The other substantive matter of democracy in a general election is competition. Rules are set and all participants must abide by these. There is a referee who supervises the competition and guarantees fair play. The competition results in a winner and inevitably a loser. And most importantly, the loser must accept the results gracefully. That’s why, in a mature democratic country, soon after the quick count result, the loser will give a concession speech and ask his supporters to support the winner. If not, democracy brings chaos.

These preconditions bring us to the current situation of RI’s nascent democracy. In fact, after 16 years RI’s democracy has run quite well. However, the recent dispute in the presidential election is a wake-up call. Here are some notes:

Hours after the election people got confused because the two camps claimed different results. One camp announced Prabowo Subianto’s win, but the other claimed Joko “Jokowi” Widodo won. But if we scrutinize further we find that the former camp carried out its survey with a tendency to justify Prabowo’s win. The latter’s result was similar to the General Election Commission’s (KPU’s) result. Obviously, the quick count had been used to disrupt the democratic process and give false hopes to the loser.

Second, there was the blow-up over baseless vote-rigging accusations. After expressing jubilation at “winning” the election, Prabowo‘s supporters asked people to wait for the KPU’s result, but one or two days before the KPU’s announcement Prabowo suddenly asked for a cancellation. Then he withdrew from the vote recapitulation process just minutes before the official announcement that declared Jokowi the winner.

As a last ditch effort, Prabowo resorted to his constitutional rights by filing his case with the Constitutional Court. He made accusations about a structured, systematic and massive vote rigging by the KPU.

Finally, some have blatantly abused the tools of democracy, such as the quick count and the right to dispute the results, since there is no solid proof — let alone 10 truckloads of evidence. Unfortunately, some people still buy this humbug and tolerate such denial of losing. This might be the corollary of a lack of education.

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