Nationalist in Free Market Era

published @ The Jakarta Post

Indonesian Democratic Party of Struggle (PDI-P) politicians have befuddled us many times. They seem to emphasize nationalism, the need for a people’s economy, but sometimes their policies contradict the ideologies they tout.

During Megawati Soekarnoputri’s 2001-2004 stint, she made many blunders in regard to nationalism. First, she divested the government’s majority share at Indosat, a state-owned company, to foreign firm Singapore Technologies Telemedia (STT). The government not only sold a lucrative company but put national security at risk.

Second, she sold Tangguh natural gas at a cheap price to China via a long-term contract. She fiddled away a big source of big government funding to satisfy national ambition. Third, she sold the Pertamina-made very large crude carriers (VLCC). The vessel was codesigned by Indonesians and it would have given Pertamina an advantage. Recently, Jakarta Governor Joko “Jokowi” Widodo made the same mistake by buying Chinese-made articulated buses instead of those domestically made by PT Inka for the Transjakarta fleet. Those Chinese-made buses were found to be rusty and damaged. Procedurally speaking, what Jokowi’s administration has done is not wrong.

The provision of buses was undertaken through a competitive international tender. The products that fulfill the right specifications and offer them at the cheapest price should be awarded the tender. Unfortunately, Inka’s articulated buses lost to China’s. Inka, however, still provides Transjakarta single buses. Inka also previously lost to a Chinese company in Soekarno-Hatta International Airport’s commuter line tender.

The tender is under investigation but Chinese products are a threat to almost all national products. Jokowi, who is tipped to be Indonesia’s next president, must pay attention to this. National products have to be championed. And the lessons learned from China’s auto industry, which dominates the global auto industry, in relatively short terms must be drawn.

In fact, the Chinese government intervene in the industry through state-owned automakers. It strengthens its domestic automakers; it regulates the transfer of technology from foreign automakers through joint venture; and, ultimately, it develops a Chinese brand.

In contrast, Indonesian leaders abandoned the potential of its state-owned automaker. In 1965, Sukarno uttered the vision of berdikari (stand on our own feet — self reliance). Former president Soeharto forged this policy through establishing strategic industries. Inka is a state-owned company specializing in rolling stock and automotive manufacturing. If we can produce things on our own, why are buying from China?

Indonesian leaders, including Jokowi, seem naive when it comes to free-market implementation. Historically, almost all nations, including the UK, US and Japan, protected their own industries in the early years of industrialization.

Finally, in contrast with the stale economics textbook, the state can regulate the market for its own interests. As market law goes: “market is great as long as you win.”

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