Clarification

Due to recent online articles about my appointment, my blog have been getting a lot of page visits, particularly on my last post.

The main referrer for that particular post was this link below:
http://manado.tribunnews.com/2014/11/22/tulisan-fika-fawzi-asisten-cantik-menteri-susi-mengkritik-kabinet-jokowi

First and foremost, I would need to point out that despite my appointment as a government officer, I am a professional whose loyalty is for the Republic of Indonesia, regardless who is the President. I do not have any political or corporate affiliations. All I have is my freedom of mind.

Thus, I have maintained my personal blog as a collection of analysis and opinion pieces as a public policy scholar.

All of my writings here, should be attributed to me and if someone else quotes it, they should have the courtesy to contact me before posting it somewhere else. Furthermore, if someone would like to translate it to Bahasa Indonesia, please do it properly and do not use Google Translate.

Regarding the said article above, it is a misleading headline and if one is diligent enough to understand the tone of my writing, it is an analysis of President Jokowi’s style of leadership, his choices of policies and ministerial appointments. I am cautious about how the media highlights the spectacle of the ministerial announcement more than the rationale behind the decisions. As responsible citizens, we need to apply critical thinking and monitor how the government implements its policies to ensure that they work for our benefit and not the benefit of political/corporate elites.

My hope is that the media does these kind of analysis instead of focusing on the personal profile of ministerial assistants such as myself. It is more unfortunate that the focus is on my looks particularly, instead of my competence.

Therefore, allow me to do my job properly, as I want only the best for this country and its people. And as of now, I believe that working with Ibu Susi is one of the best ways to do so.

Help us to focus on the performance of our programs and policies, report to us what’s being implemented on the ground, and let us know if we’re doing a good job or a bad job – and we will improve it. No more Asal-Bapak-Senang (or Asal-Ibu-Senang) reports.

This is a new era of governance and I wish the Indonesian media can keep up with real journalism to support it.

I thank you for your attention.

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Men in White

©2014 merdeka.com/arie basuki
©2014 merdeka.com/arie basuki

Indonesia is a country of symbolism. Stemming from the Javanese culture, which comprises a majority of the population, every ritual and events will be embedded with subtle messages in the form of symbols and gestures which is not explicitly stated or written – or in some cases, it is used to accentuate what has already been stated or written. Those who can master these symbolisms will surely be able to send the right messages to the right people, win hearts, and even win elections.

President Jokowi, a Javanese man himself, is someone who understands and knows how to play these symbolisms.

The cabinet announcement last week, was held on the lawn of the Presidential Palace. His ministers, was donned in white shirts and black pants like the trademark attire of the President himself. When introduced, each of them was asked to run to the President. Hence, the “Working Cabinet” or Kabinet Kerja, was symbolised as the President’s men and women, who follows the same instruction of the President. They are ready to work, starting with a clean slate, different from the past regimes.

At least this is what they would like to portray.

The earlier canceled cabinet announcement was supposed to be held in Tanjung Priok, arguably Indonesia’s busiest port, and working helmets was prepared for each of the ministers. Tanjung Priok would have been a good show of priority for Indonesia’s maritime revival, similar to President Jokowi’s first speech after the presidential election announcement in the old harbor of Sunda Kelapa. Perhaps it is good that the Tanjung Priok plan did not materialise, because some were already quick to critique whether President Jokowi is someone who prefers “being with the people” instead of someone who can work efficiently from the palace.

As far as intended symbolism goes, there are others who can read between the unintended symbolisms as well. For example, why is Puan Maharani, daughter of PDIP Matriarch Megawati Soekarnoputri did not run towards President Jokowi when introduced as the Coordinating Minister for Human Development and Culture, and instead used a golf cart when other ministers walked in the palace.

Symbolisms may also be used to tone down the realities on the ground.

Despite the focus on the maritime sector, the newly created post Coordinating Minister for Maritime Affairs needs a lot of hard work since the institution is practically still Indroyono Soesilo as an individual. There are no staff, no budget, and no programs to manage yet, although thankfully BPPT is quick to lend an office for his daily work.

In the other ministerial posts, we also need to observe how the massive institutional shifts and mergers will play out:

  • The Directorate General for Higher Education under the Ministry of Education will now be merged with the Ministry of Research and Technology
  • Ministry of Public Housing will now be merged with Ministry of Public Works
  • The Directorate General of Spatial Plan under the Ministry of Public Works will now be merged with The National Land Agency – supposedly to have regulatory powers when transformed as the Agrarian Ministry
  • The Ministry of Forestry will now be merged with Ministry of Environment

The latter is even more worrisome, as environmentalists were quick to point that the two ministries have different paradigms as one is for exploitation, and one is for protection. When combined with spatial planning powers, conversion of natural forests into palm oil plantations or mining concessions will be expedited without proper checks and balances. One could have faith if the strategic ministerial posts were given to professionals, but we should be wary since these two posts are given to the Nasdem Party. One should also be even more cautious when the downstream and trade sector have the risks to be captured by corporate interests that will benefit from such arrangement.

There is a risk that in the early days of the government, ministries will be busy doing internal reorganisation work instead of strategically thinking about what they want to do in terms of policies and programs. Not to mention that there is a risk of delay since the apparatus of the parliament is not yet ready to discuss budgeting and program planning due to the recent DPR leadership crisis. The media is also not helping by highlighting the idiosyncrasies of the newly-appointed ministers rather than scrutinising on what they think the government should and can do.

Symbolisms may be useful, but despite all the media spins, tattoos-and-whatnot, what is more important is the actual performance of these ministers. After all, white is a colour that can easily get tainted.

Setting the stage

All the spotlight on an empty stage. Source: TRIBUN/Herudin
All the spotlight on an empty stage. Source: TRIBUN/Herudin

In a few hours, President Joko “Jokowi” Widodo will announce his cabinet. Despite promises for an early announcement, the pressure surrounding him to make his dream team is immense and hence, the delay. The end product, based on the various versions of the list of names being spread around, is beginning to look more of a product of compromise rather than a product of someone who can make his own decisions.

President Jokowi’s greatest strength is in his ability to communicate and gain the trust (and votes) of the common people. At the same time, however, this may irk the elites that are still clinging on to power. Shaping his cabinet seems to be the work of accommodating the interests of those who put him into power in the first place.

Jokowi_political_landscape

The quality of my doodle and handwriting aside, I would like to point out that we have a very popular President backed by an army of volunteers who would be willing to be mobilized at his will (but erratic and uncontrollable at times). However, President Jokowi has to manage the interests of Ibu Megawati and PDIP, his Vice President Jusuf Kalla (I’m observing that he is an autonomous political actor who does not stand entirely with the President and a veteran political operator himself), the Indonesia Hebat coalition (with Surya Paloh, Wiranto, etc) and the opposition, the Merah Putih coalition (with Prabowo, Aburizal Bakrie, etc) who is already giving the President a challenging landscape in the parliament. Military actors are operating as well in each of these camps (not as an institution ever since the erasure of “dwifungsi” by de jure), with the Islamists split between the two coalitions, the moderates tending to side with Jokowi.

President Jokowi’s track record in Surakarta and Jakarta should be applauded, but this is national politics. He would need maneuvers to outwit his opposition and prove that he is a man of himself and not a puppet of his political backing. What he did with KPK and PPATK to “screen” his ministers is one way for him to say “no” – along with the help of the media who can still back him up as long as he is still popular. Thus, his compromised cabinet may seem understandable, but in the very short run President Jokowi would need to prove that he can make his cabinet work – because he can’t run the government by himself. The stage is now set, and this will truly test his capabilities as a leader of change we voted for.

Jokowi's new "cabinet". Source: Twitter/@liputan9
Jokowi’s new “cabinet”. Source: Twitter/@liputan9

What is it with the beef import quota?

I think the beef import quota corruption case is going to the wrong directions. Instead of focusing about the case and the economic impact of the underlying import quota policy, most of the media’s focus is increasingly becoming on the women or the sex scandal surrounding it. I’m kinda pissed with the whole spin and I feel that I (at least) have the obligation to unpack the real issues that we should be debating instead of ‘proper’ nicknames for Javanese or Arabic girls.

Moving on. I think we firstly need to look at the structure of our beef market. Second, the implications of the import quota policy and of course, the ongoing corruption case on the beef import quota.

What needs to be in our urgent attention is that the current average price of beef in Java is about Rp. 85.0000-95.000/kg (USD 8-9/kg), and this is a significant jump from last year’s average price which is about Rp. 76.000/kg or Rp.60.000/kg in 2010. You look at the numbers (Ministry of Trade website), and you would see that there is roughly an increase of 20% in beef prices in just two years. Not normal.

Production-wise, if we look at the cattle sensus data, the number of beef cattle have shown an increasing trend. If we have an abundant of cattle why is the price so high? I need to quickly point out, provided that our data is valid, the production data shows the number of available cattle, not the number of meat available for consumption. The data that is largely missing is the number of meat stock we have in our abattoirs or traders (the middle supply chain).

Simple beef supply chain

We import beef in two forms: live beef cattle – so you can put them in feedlotters and make them plump (productivity counts), and frozen meat. Percentage-wise, we import about 60% of our import quota for live cattle, while 40% of our imports are frozen meat. We also limit the places where the imported beef can enter in our territory (only in certain ports), so it doesn’t disrupt the local market. You do want the poor cattle farmers to increase their welfare, no? No? You want cheap beef instead?

Now we go a bit to the rationale for the import quota. Basic microeconomics (for which I have mostly doodled during class – sorry Prof) tells us that if we have the price according to the world market (Pw), you have suppliers willing to sell at a cheaper price (and perhaps better quality too), while the local suppliers can’t compete and can only supply a small amount at that price. So let’s say the government imposes a quota and there is going to be a limit on how many beef products are available on the local market. Thus, this gives the opportunity for local cattle farmers to compete but alas, consumers might have to bear the more expensive price (Pq) as quotas affects the price indirectly. Voila, increase of producer surplus and decrease of consumer surplus, yadayadayada. The difference between quota and tariffs, the government can get the revenue from the tariff, but if it’s a quota – then whoever becomes the importers can get all the profit.

Import Quota

So who decides which importers can import the beef?

Now this is where the beef gets juicy (horrible pun, sorry).

In  January 2013, the Corruption Eradication Commission (KPK) caught red-handed the handing over of money from Juard Effendi and Arya Arby Effendi, two executives from PT Indoguna Utama (a well-known beef importer), to Ahmad Fathanah (AF) – known to be the close acquaintance of Luthfi Hasan Ishak (LHI), the president of the Prosperous Justice Party (Partai Keadilan Sejahtera) at the time. Now the case is on trial and what is at stake is the government’s credibility in setting the import quota policy, as well as PKS’ credibility as a major Islamic party that sells itself as a clean and corruption-free party – with die hard grass root sympathizers (more on this political Islam aspect on another blog post).

But it’s not that easy for KPK as well. In order to prove that the importers paid a sum of money to AF and LHI to get the beef import quota, they need to prove that LHI in fact has an influence over the Ministry of Agriculture (with Minister Suswono, a PKS cadre, at its helm) – to give a recommendation for Indoguna as an importer – which is later decided in a coordination meeting between related ministries (i.e. Ministry of Trade and Ministry of Industry). In this meeting, apart from deciding which firms have the license to import based on the listed criteria, the government also decides the quotas – which have been decreasing for the past two years (compared to 2010).

Quota Influence Cycle

Seeing that this is quite a challenge, that’s why KPK (along with the help of PPATK) also use the Money Laundering Law on the suspects because the burden of proof shifts to them – they need to prove that the flow of money and all the financial transactions that goes through them is legit. And this is where the “many women of AF” story gets messy and convoluted the beef import story because there’s so many unanswered flow of money that goes to these women through AF.

Since the beef import quota case is still on trial, it is too early to know whether any of the suspects are going to jail or if any other actors are going to be implicated. But what we do know now is that the whole import quota policy is based on an unreliable production data, driven by a self-sufficiency policy that is not adding any value to cattle farmers, nor giving the consumers affordable meat.

With rising income in Indonesia, you’ve got an increasing demand but you’re limiting the supply and you expect things to be cheap? Do the math.

The BP Migas Tsunami

Some bad news and good news for the Indonesian oil and gas industry. After the unexpected ruling from the Constitutional Court (Mahkamah Konstitusi – MK) to dissolve BP Migas – the state’s regulating body for upstream oil and gas and contracts – many were left in limbo with questions regarding the status of the existing contracts and of the future of the industry as a whole. The good news is, perhaps this is could be an opportunity for governance reform in the industry. Oh and, perhaps good news for lawyers as well as their billable hours may increase.

The crux of the matter lies in Article 33 of the 1945 Constitution, in which the Court believes that with the structure of BP Migas after the 2001 oil and gas law, the state is unable to utilize its natural resouces to maximize its benefits for the welfare of the people. The Court argues that BP Migas is unconstitutional because BP Migas prevented the State from exercising directly its full authority over its oil and gas resources and with the signing of the Production Sharing Contract (PSC) the State lost its freedom to make regulations or policies contrary to the contents of the PSC.

In a way I believe the Court had a point, because BP Migas wasn’t the only regulator as contractors would still need to liaise with the Upstream Oil and Gas Directorate under the Ministry of Energy and Mineral Resources (“MEMR”). It’s cumbersome for contractors at times because you had to go to both BP Migas and MEMR anyways. Calling BP Migas as a regulating body would not be entirely correct, in my opinion. They are the executing legal entity to enter into PSCs with oil and gas contractors (and they negotiate on behalf of the government to agree on the contract’s terms).

Now, with the “tsunami” ruling that swept everybody off their feet, the government needed to act quickly to ensure that in the aftermath of the tsunami, there’s a continuity in the oil and gas industry. They issued Presidential Regulation No. 95/2012, stating that the responsibilities of BP Migas is now transferred to a temporary working unit (Upstream Oil and Gas Business Activities Implementation Unit – UPKUHM) under the direct supervision of the Minister of EMR, and all contracts will remain in effect until they expire or until such other dates may be agreed.

Thus, as Prof. Hikmahanto argued in his Kompas op-ed (do note that he was also consulted by the government during the court process), with the MK ruling, the government is actually exposed to the liabilities of the contract. He cautioned, with this arrangement in effect, the government is in hostage of potential legal problems and this beats the purpose of the “maximizing benefits for the welfare of the people” argument.

The 2001 oil and gas law is currently being revised, but with this ruling, the ideological battle is locked and the law must be revised accordingly. If I can draw on Prof. Hikmahanto’s op-ed correctly, there would be at least two options to move forward: A) nominate a state-owned enterprise to act on behalf of the government so that it can exercise its petroleum resources – i.e. Pertamina like the pre-Reformasi era; or B) a total overhaul of the oil and gas law and apply the mining licenses regime into the oil and gas industry.

Costs and benefits are a bit murky at this point of time, but we know the precedent in option A and how difficult it is in implementing option B. Pertamina isn’t exactly “clean” from corruption and that is what prompted the oil and gas law in 2001 (separation between the regulator and the operator). Meanwhile, knowing the track record of how Laws in Indonesia are legislated together with DPR, the longer the oil and gas law revision will take, the longer that the government will be exposed of the liabilities of the contracts. Not to mention whether it is truly practical to implement a licensing regime in the oil and gas industry.

Funny thing is, the group of proponents of MK’s ruling are the same proponents who proposed the 2001 oil and gas law in the first place – Islamic groups such as Muhammadiyah and Islamic political parties PAN, PKB, PPP, PK, PBB – who were dominant during Reformasi and made Abdurrahman Wahid the President (read Lin Che Wei’s analysis here).

One should be curious to understand why they would repeal what they proposed earlier – if not for dubious political motives and not for “the welfare of the people”.

All that money…for what?

I was browsing through the 2013 budgetary note from the Ministry of Finance and made this chart (sorry, too lazy to translate it into English):

Obvious thing that I wanted to point out is how wasteful we are for spending our money on mostly energy subsidies (fuel and electricity) which amounts to a total of 274.7 trillion IDR. I made an argument about why I’m against fuel subsidies previously on my other post, but this time I’m going to mention a bit about measuring impact. If Indonesian politicians and/or decision-makers finally had some sense to lift the subsidies, would they spend the money wisely into developing good programs for its citizens?

Program evaluations are not something novel for development work – since the taxpayers of the donor countries would like to scrutinize whether the aid money they’re giving goes into the right directions (or else it’s better to be spent in their own countries). And so, the eval wonks should have something similar to the “impact chain” tool to measure whether what they’re doing  is indeed helping the world to be a better place.

So let’s say you want to distribute some boats for some needy group of fishermen, you don’t only give them the boat put perhaps some capacity development to teach them how to fish better (inputs). The tangible output would be the new boats themselves, and the outcomes would be an increase of their catch when they go out to sea, which subsequently lead to an increase to their welfare (impact). Of course this is an over-simplification and the real stuff would involve baseline data, rigorous methodologies, and resources (time, money and the right brains – oh hey, maybe an MPP degree would help). But doing evaluations is indeed a worthwhile exercise because in the end you get to find out which programs deserve to stay and which ones deserve to be terminated.

Now, how often do we hear the results of the program evaluations made by the government (assuming that they are even evaluated)? Do we even know what are all the programs that the government actually oversees?

The thing is, government spending increases year by year, and it is quite a common knowledge for Indonesians that it is usually spent late in the year. Some attribute it to procurement issues, but most of the time it’s just poor planning. And they can’t make better plans if they don’t evaluate the previous programs beforehand.

And Jakarta voted…

20120920-180851.jpg

For Jakartans, 20 September 2012 would be a historical day and for some, it’s a free leave day to plan your long weekend out of the city (offices in Jakarta are given a holiday for people to go out and vote). It is the day when the fate of commuters in Bogor, Depok, Tangerang and Bekasi (Bodetabek) are decided by the voice of Jakartans. Most likely it is also the day when the fate of property developers in the Bodetabek area are decided as well.

Quick count results show that Joko Widodo (“Jokowi”) won against the incumbent governor Fauzi Bowo. Many articles already point out why Jokowi stands out from Fauzi Bowo, such as this piece in NYTimes or in Foreign Policy about Princeton’s case study on Jokowi’s leadership in Solo, but I’m interested more in the level of participation of voters – only 67.35% (the first round of elections was 64.4%).

When people vote, they vote for the leaders on top, but the real impact is indirect because voters mostly deal with the street-level bureaucrats on a daily basis (diagram below). My hypothesis is that the low turnout of voters is caused by people assuming that whom they vote for won’t matter because business-as-usual in the Jakarta bureaucracy will be implemented – thus voting won’t change a thing. Personally I believe we need to persuade voters that there are leaders that can change how the bureaucracy work and they can deliver results – though there are still few in Indonesia. It is just unfortunate that in Indonesia these leaders are pre-selected by political parties and not by the people.

20120920-181055.jpg

Technically Jokowi hasn’t won yet. The official results from KPUD needs to be announced some time in October and he has to formally resign as the Mayor of Solo (with entailed risks if he’s not permitted by DPRD). Jakartans on the other hand, are impatient and they want to see quick results (i.e. less congestion, less floods). No matter who becomes governor, it depends whether he/she can change the way things work in the bureaucracy through his/her leadership, program and policies. And this doesn’t come instantly.

Then there’s that problem unique to Jakarta. It is Indonesia’s engine of growth (see figure above from the World Bank) and it definitely attracts people from the rest of the country. What the future governor needs to realize is that policies to prevent people from coming to Jakarta is futile, because in principle, cities attract poor people. What Jakarta needs is a governor that is committed to develop its people as complete human beings (education, housing & health) and not just develop places that caters to the rich.