GLOBALIZATION AND GOVERNANCE By Prijono Tjiptoherijanto Globalization Issues. Globalization and liberation of trade have become casual issue in the daily conversations. Since twenty years ago, the globalization nuance has been felt everywhere, included Indonesia. Since early of 1990s, even rural people have been quite familiar with this new term. The scholars who are also very fluent in using that term always suggest the important benefits of this new trend. First, globalization would enable the market mechanism operate freely and an integrated global market would be formed. Market mechanism is considered beneficial for the entire groups in the community. Second, globalization is an unevitable and unreturnable reality since globalization is basically not a theory proposed by an expert or a group of experts but a reality that have to be accepted by every community in any country around the world. Third, globalization would be beneficial for all countries in the world through the freedom in trade and business and by growing democratization process in the Third World countries in which the people have to experience much stress from their dictatorial governmental system. In fact, the expectations put on the current of globalization do not meet with the reality happening in countries being grouped as the Third World. Some experience listed in Table 1 demonstrate the impact of globalization initiated by industrial countries and multinational companies on developing countries especially in Asia and Africa. Table 1. Globalization in the South, poor countries in Asia and Afrika (a) Amount of money owned by the poorest borrowing countries in the world (47 countries) loan US $ 422 billions (b) Amount of money expended yearly by Western industrial countries for armament and army (c) Amount of fund collected from Live Aid music concert in 1985 for poverty alleviation in Ethiopia (d) Amount of fund needed weekly by African countries to pay their loan interest only (e) Amount of profit made by Exxon company in 2000 US $ 422 billions US $ 200 millions US $ 200 millions US $ 16.9 billions 1
(f) Total amount of foreign loans borrowed by Benin, Burundi, Chad, Guinnea Bissau, Sao Tome, Togo, Rwanda, Republic of Middle Africa, Siera Leone, Mali, Somalia and Nigeria, altogether. US $ 16.9 billions Source : David Roodman, Still waiting for the Jubile : Pragmatic Solution to the Third World Debt Crisis, World Watch Paper 1555. Washington D.C. : World Watch Institute, April 2001. In Addition, the situation of the developing countries is incomparable to the industrial nations. Table 2 shows the comparisons of assets owned by several countries and the operational income of major companies with operational networks around the world. Table 2. Comparisons of Assets of Some Countries and Multinational Companies No. Country GNP Company Sales (million US $) (million US $) 1. South Africa 131,127.0 Exxon Mobil 163,881.0 2. Malaysia 74,634.0 Siemens 75,337.0 3. Chile 71,092.0 Hitachi 71,858.5 4. Pakistan 59,888.0 Sony 60,052.7 Source : Sales : Fortune, 31 July 2000; World Bank : World Development Report 2000. Information showed in Table 2 indicates how leading trans-national companies own bigger or almost equal assets to some countries GNP. This provide such giant companies with enormous bargaining power, which is also equal or even bigger than that of some Third World countries. As a result, it seems that the universal benefit slogan claimed by the supporters of globalization is not fully true, or it is not always consistent to what was initially expected. The following table suggest that during the course of globalization some parties do benefit from it, but some other parties are not less fortunate, particularly poor countries. 2
Table 3. Distribution of International Assets, 1997 Group of Population National Income Countries Million % of World Population Billion US $ % of World GNP First World 860 14.7 23,233 79.2 Second World 368 6.3 1,232 4.2 Third World 4,622 79.0 4,869 16.6 Total 5,850 100.0 29,334 100.0 Source : data from various sources: UNDP, World Bank, and OECD 2000. Note : First World Countries consist of OECD countries, except new countries such as South Korea, Hungary, Mexico, Poland and Checz Republic. Second World Countries are ex- USSR and East European Countries, ex-communist block. Third World Countries consist of 127 developing countries that are considered misdirected in their development. The figures in Table 3 indicates that there is some imbalance of national income among countries around the world. In 1997, more than ten years after the globalization and liberation of trade had been affecting the world, the developed, industrial countries with only 14.7 per cent of the world population had 79.2 per cent share of the total world income, while poor countries in the Third World with 79 per cent of world population only had share of not more than 16.6 per cent of total world income. Facts that can be seen in the official data published by leading international agencies like UNDP, World Bank, Industrial Countries, OECD, and other leading international agencies suggest that globalization does not always result in beneficial impacts for everybody. It is not a zero sum game (according to the economics or political term). Developed industrial countries and giant transnational companies, the main supporters of globalization, are more benefited from this new trend, while the developing poor countries get more negative impacts of it, except some countries in Latin America, especially Cuba and Venezuela, that struggle to defend themselves from the pressure of industrial countries, the Super Power countries that always try to compel their own interests. One way that the Third World countries can use to join the game of globalization is by implementing a good governance in their own government. 3
Good Governance Good Governance is an important development occurring during the last two decades. It becomes a new paradigm, replacing the old one, Max Weber s administration concept. According to this new paradigm, there are three major actors in governance, namely : government, civil society, and business society. Thus, a good governance involves these three actors with their respective functions. To achieve a good governance, some requirements, as summed in the good government quality index, need to be met. They are : (1) societal participation index which represent political stability and the freedom of speech (2) governance orientation index derivate from the indicators of efficiency in justice and efficient and corruption-free bureaucracy. (3) social development index indicated by human development and distribution of income. (4) economic management index indicated by world market orientation, independent central bank, and ratio of debt to GNP. Based on these four indices, some Asian countries can be grouped into three categories in terms of their governance quality : GOOD, MODERATE and POOR as shown in Table 4. Table 4. Governance quality of Some Asia Countries No Country Quality Index Governance Quality 1. Singapore 65 2. Japan 63 3. Malaysia 58 GOOD 4. South Korea 57 5. 6. 7. 8. 9. 10. 11. 12. Sri Lanka The Philippines India Thailand China Indonesia Nepal Pakistan 45 44 43 43 39 38 36 34 MODERATE POOR Source : Adapted from Table 2.1, Jeff Hunter and Anwar Shah, 1998. Applying a Simple Measure of Good Governance to the Debate of Fiscal Decentralization. World Bank Policy Research Working Paper 1894. Washington D.C. 4
The figures in Table 4 shows that Indonesia is among countries with poor governance. Therefore, Indonesia needs to take efforts enabling it to compete with the other countries through the improvement of governance. A fundamental change would be needed in order to achieve a governmental bureaucracy that is free from corruption - collusion - nepotism (KKN). Bureaucracy Reformation The main actors in a government are the civil servants (pegawai negeri sipil), who are often referred as the bureaucracy. Bureaucracy may be comparable to a steering wheel that manages resources owned by the country to reach the desired goals. For the government, the objective, the mission, and the target is the same: the people prosperity. The ability of the bureaucracy to undertake this task depends much on the characteristics of the actors, the civil servants. Therefore, a bureaucratic reform should be preceded with the implementation of reformation among the civil servants, civil service reform. The reformation in bureaucracy can be done through civil service reform seen from the institutional side as well as the moral side (moral supports). Through well-directed and systematic reformation of civil service, a good government serving as a powerful basis to deal with globalization and liberation of trade would be brought into reality. The emphasis on institutional aspect is based on the facts that the poor directed civil service management have been resulting in too many civil servants with poor quality. Furthermore, an appropriate institutional management is highly needed to improve the selection system and in turn, appropriate training for the civil servant would be enabled. If all these efforts can be implemented, probably the remuneration or salary for them might be planned more appropriately. As a result, the intention to do corruption-collusion-nepotism, particularly corruption, among civil servants can be at least minimized, if it is impossible to be totally eliminated. Hence, alternatives as bases for possible policies in governmental bureaucracy can be made in order to improve the governance quality according to the requirements for dealing with the current issues of globalization. Selected References 1. Fukuyama, Francais, 2004. State-Building : Governance and World Order in the 21 th Century. Cornell University Press, Ithaca, N.Y. 2. Gellinas, Jacques B., 2003 Juggernaut Politics: Understanding Predatory Globalization. Zed Book Ltd. New York and London. 5
3. U.N. Dept. of Economic and Social Affairs, 2005. World Public Sector Report 2005 : Unlocking the Human Potential for Public Sector Performance, New York. 4. World Bank, 1993. Governance. Washington D.C. 5. World Bank, 2001, Indonesia : The Imperative for Reform. Report No. 23093-IND. Jakarta. Jakarta, 8 September 2006 Prijono Tjiptoherijanto Professor of Economics University of Indonesia 6