Socialism in Indonesia and Pancasila

PANCASILA SOCIALISM

Indonesia, Pearl of The Equator, is the world’s fourth most populous country that has an estimate of 258 million populations. It consists of a diversified ethnic, linguistic and religious groups throughout its 34 provinces situated in its more than seventeen thousands islands spread from east to west which is almost as wide as Northern America. Indonesia has the worlds' largest Moslem population, which is about 88% of its total number. Indonesia also has the largest economy in Southeast Asia and is one of the emerging market economies of the world today.

Garuda Pancasila, The Coat of Arms

PANCASILA as illustrated by the picture above is the official philosophical foundation of the Indonesian Republic; Panca meaning Five and Sila meaning Principles. Pancasila comprises of five principles held to be inseparable and interrelated which are as follows:

1.      Belief in the One and only God.

2.      Just and civilized Humanity

3.      The Unity of Indonesia

4.    Democracy guided by the inner wisdom in the unanimity arising out of deliberations among  representatives.

5.      Social Justice for all the people of Indonesia.

Within the five, they all have to to be interrelated and inseparable. The Social Justice principle would have been always related to the other principles, such as Democracy and especially with the first principle that’s referencing God. That is in a stark contrast with Marxism whereby Karl Marx, the founder, was known with his belief that, “Religion is the opiate of masses.” Therefore, it would be difficult, if not impossible for this nation to slip to Totalitarianism and /or Communism.

Based on Pancasila, Socialism would be inherent in the foundation of Indonesian politics and governance. We should admit that it had not worked well in the past because Pancasila was not applied properly. From Nationalism, the nation was changing and leaning toward Communism in the first 20 years of the Republic and then to Semi-Totalitarianism filled with cronyism, nepotism and corruption under then President Suharto for 30 years. However, let us now look ahead and note what has recently happened with Indonesia. Representing Indonesia is Jakarta and herewith, let's take it as an example.

Jakarta is the capital city of the Republic of Indonesia that has a size of approximately 665 kilometer square. It represents the melting pot of the nation with 300 ethnic groups. It is relevant to be noted that although Socialism is one of the basic foundations of the country, Indonesia began a process of rapid government decentralization in 1999 from a formerly strong centralized government structure to regional autonomy. Jakarta is not merely a city but it has a status as an autonomous Special Region governed by a Governor. Jakarta is the country’s economic, cultural and political center with a population of 10,075,310 as of 2014. It is the 12^th largest city in the world; the Metropolitan area, called Jabodetabek (Jakarta, Bogor, Depok, Tanggerang and Bekasi), is the 6^th largest in the world. In 2009 it had an income per capita in excess of US $ 10,000.00.

After decentralization, economic growth began to increase; In Jakarta it was 5.88 percent in 2015. According to the Indonesian Central Bank (BIs) it showed a 6.48 percent increase in the fourth quarter of 2015 compared to 6.12 percent recorded in the same period of 2014. This was confirmed by the States Statistical Agency (BPS) data of the regional gross domestic product (GDP) on February 5, 2016. The Gross Regional Product Nominal (GRP) per ca-pita is projected to increase to 7.3% beginning 2017. GRP is one of the measures for economic growth in Indonesia.

In the year of 2012 under then Governor Jokowi (now the President of Indonesia) and Vice Governor Basuki Tjahaja Purnama (who is better known as Ahok), Jakarta created massive social programs in the areas of Housing, Health, Education and Transportation. 

On November 2012 the Jakarta Health Card (KJS/Kartu Jakarta Sehat) and Jakarta Smart Card (KJP/Kartu Jakarta Pintar) programs were launched. It provides free health insurance for the people who meet the criteria to be in the poor category. The cards guarantee 12 years of free education. They also provide for students’ tools and educational needs. The cards guarantee free Higher Educations for poor students who pass the entrance exams. Why are these social programs given in a form of cards instead of cash?  According to Mr.Basuki, the benefits are provided in the form of electronic-cards so their usage can be easily tracked, verified and controlled by the government. It would also ensure accountability to achieve the intended result as well as to avoid benefits misuse, waste and corruption. Jakarta has recently built 44 community hospitals in 44 districts across the capital region.

Several high rises of Low Cost Public Apartment complexes were built recently to accommodate poor people who were removed and then relocated from their slum/makeshift dwellings along the banks of Jakarta's 13 main rivers. Many more are to come based on the current plan. Jakarta has built waste dumping sites in its almost all district neighborhoods. Dikes and two big Reservoirs have been restored and more are to come. The rivers become garbage free, cleaner, and deeper. The flooding problem Jakarta had to face every year is practically now gone. This achievement translates to a big saving for the region. Jakarta is also developing its Northern Coast line in reference to its Water and Flood Management program. A huge reclamation project building artificial islands and a Giant Sea Wall is under way.

Local market places were built and provided for the poor people near their apartments. They could either use it to open up their own businesses or conveniently use it as consumers. Free Community Parks and Sport Centers, in partnership with local businesses are also being built for the well-being of the community.

Free transportation for the poor is provided.  Public transportation such as busses is added and modernized. Mass transportation system such as the MRT (Mass Rapid Transportation system) and Light Train system are being built to alleviate chronic traffic jam problems.

However, it is interesting to note that Indonesia, including Jakarta has no formal social welfare program when it relates to unemployment. In a way it would discourage people for not wanting to work. During crisis this social protection has been largely based on informal arrangements, such as community involvement and faith-based donations. Indonesian is known with one of its cultural traits called “Gotong – Royong”, a spirit of team work in the context and frame of the first 3 elements of Pancasila namely, the belief in God, Humanity and Unity as referenced above.


The low-cost of health care, housing, free education and free transportation, have the effect on increasing people's residual income, living standard and therefore, ability to compete and participate in the open labor market; hence, resulting in the increase of productive population as well. Under Governor Basuki T.Purnama aka Ahok's social programs and policies, Jakarta has been transforming rapidly to a better city or region within the past 4 years.

How does Jakarta fund its Social Programs?

Jakarta has a stratification of taxation which consists of Income Tax, Local Tax (Pajak Daerah) and Central Government Tax. Income Tax employs a progressive rate commencing at 5% sliding to 30% per annum. Companies are taxed at a rate of 25% (less than the US corporate tax rate of 40%), for both domestic and international sourced income.

Land and Building Tax are calculated at a value calculated by the Regional government called NJOP or Nilai Jual Objek Pajak – which is less than real market worth. In Jakarta, land tax is 10% of the Government calculated value (NJOP). This tax is mainly applicable to those of middle class and upwards. There is an exemption when the land and building value is less than 1 miljar (approximately US $ 77,000.00) or less than 100 meter square, thus it's practically free or no tax for the poor.

To expand its economic growth, Indonesia has been very open and friendly to businesses, but not to say that the government has no control of it. Certain type or sector are owned and controlled by the Government. They are called BUMN, Badan Usaha Milik Negara or Indonesian State Owned Enterprises. Among the 168 lines of businesses, 120 are open for foreign and domestic investment, 48 for domestic investment only and 13% or 25 lines are close for public or private investments (source: Jakarta Investment and Promotion Board).

The current governor of Jakarta, Mr.Basuki T.Purnama (Ahok), an ex-businessman and politician himself, has a unique and smart way of involving business sectors to help funding his social programs. At the moment there is a huge project underway for the construction of a complete new City-District on its Northern Coast of Jakarta covering a total area of 450 hectares. This project includes reclamation of 160 hectares creating artificial islands off the coast of Jakarta and a big Giant Sea Wall. The master plan is geared toward the development of housing for the rapidly growing population of Jakarta and to protecting Jakarta from the rising sea-level consequences. This mega project is executed in joint venture with Boskalis/Van Ord. Unfortunately; it is temporarily on hold due to some political issues. However, governor Basuki would request 5 percent of the reclaimed land to be handover to the city administration, and 15 percent additional contributions for the developers to be granted principle and execution permits for their reclamation projects. Out of the 15 percent contribution, the administration requires developers to carry out flood prevention work in North Jakarta. Among the choices for the developers were: installing water pumps or creating pumps housing, dredging rivers, extending dikes, constructing inspection roads, and building low-cost apartments for the city. The figure of 15% was considered and arrived by taking into account the need for those businesses to make money and profit, thus worth their investments.

Mr.Basuki also uses CSRs (Corporate Social Responsibility) funding for his social projects. CSR is a legally required monetary contribution from corporations to government social projects; which at the same time these corporations are rewarded by getting certain government facilities to create exposure & demand for their products and/or services which result in a win-win situation for both sides. This model requires companies to pay the government up to 3% of their net gain. The funding from CSR has been used by governor Basuki to maintain and improve the city public transportation, public parks, roads and other social projects.

CHALLENGES

Corruption

Indonesia is marred with rampant corruption. Some people even consider it as part of the “culture”. Indonesia ranks 34^th by the 2014 world Corruption Perception Index, even below some African countries such as Nigeria, Zambia and Trinidad; Compared that to Denmark which ranked number 1, as a nation with the lowest perception of corruption, Indonesia still has a long way to go. There is almost zero confidence among the public for the Indonesian government officials and law-makers.

Recently for the first time in history, under Governor Basuki Jakarta has seen a massive bureaucracy overhaul that includes corruption eradication and governance transparency. With no hesitation his administration removed 751 structural positions in agencies and replaced them with functional positions. There were thousands of city employees removed, or practically fired, to non-active positions with a dismal salary thus creating substantial savings for the city. To enhance transparency and thus minimize (if not totally eradicate) corruption, Governor Basuki insisted the implementation of an Electronic system for all government transactions, delivery of services, procurement and tax collection. On the other hand Mr.Basuki has also increased its civil servants’ salaries comparable to, or even higher than the private sectors’. He also increased allowances based on work output and attendance, hence the application of a Merit-Based system which was unheard before from any government sector.

Race and Religious Intolerance.

Mr.Basuki T.Purnama aka Ahok was the first Chinese ethnic and Christian leader holding such a high executive position as Governor in a predominantly Moslem population country. He assumed his position in November 2014 with lots of challenges and resistance, a month after Mr.Joko Widodo (then the governor) ascended to the presidency.

Historically, besides other minorities, the Chinese ethnic has been the most targeted group by discrimination practices in Indonesia. However, discrimination against race or ethnic background became unlawful under the administration of President Gus Dur in 1999. Therefore, institutional – discrimination has ended, however the residuals still exist and palpable among the minority. Jakarta governor Mr. Basuki, aka Ahok, because of his ethnicity and religion, has been receiving strong opposition and threats from radical Islamic organizations such as FPI (Islamic Defenders Front). Actually Indonesia had been noted for its relatively high level of religious tolerance, until recent years when many conflicts between Muslims and Christians have occurred. Sadly it occurred in the era when a real democracy got implemented after the fall of then President Suharto in 1998.

Fortunately, it now appears that this race and religious tensions have slowly dissipated; nevertheless, if it does not substantially minimize to the point where law and order can be established and safety can be guaranteed, it would be a serious challenge and danger for the development and growth of Indonesia.

Unemployment

Although unemployment rate in Jakarta has steadily declined from 12.15% in 2009 to 8.5% in 2014, it is still considered high by national standard. The national unemployment rate has declined to 5.5% in 2015. With its population of 258 million, the fourth most populous country in the world and with the growing young population entering the labor force each year, it will be a challenge for the government to stimulate job creations, should there be another global financial crisis or economy slow down. Therefore, it looks like that there will be a need to create a formal controlled, but limited unemployment program as part of its social welfare system.

Summary:

The difference between Pancasila Socialism and other type of Socialism:

Based on its founding principles in Pancasila and the many social programs funded by the government, Indonesia would qualify to be called a Socialistic Nation or Welfare State. The question is what kind or type of socialistic country is Indonesia?

The Marxist-Leninism style such as in North Korea, Cuba and Venezuela would certainly not be the case, because Indonesia has a decentralization of governance system, free and strong private sector and affinity to the first principle of Pancasila which relates to God. Communism uses Centralized Planning Economy where absolute power is required, whereas Indonesia has a decentralized system.  

The Scandinavian Democratic Socialism such as in Norway, Denmark and Swiss would also not be perfectly correct since Indonesian taxation system is not as high and as “punishable” to individuals; and in some ways it is actually more effective to businesses and corporations. Indonesian top marginal individual income tax rate of 39% (or range from 5% to 39%) is much lower compared to Denmark that has 60%. Indonesian corporate tax rate of 25% which is quite modest (only 6 points higher than Singapore which is also known as a “Socialist” country which rate at 19%) even in comparison with USA, which is known as a “Capitalistic” country, that has a much higher rate of 39.1%. Regardless of President Obama's popularity and perceived success, it has become a fact that US is now experiencing a very slow growth of 2.1% , the weakest since Post-World War II 1940. I hope this would be a reference and a lesson for the Indonesian government and policy makers. At the moment, after decentralization, Indonesian economic growth began to increase and it reached 5.18% in the second quarter of 2016.

Instead of simply taxing more, Governor Basuki provides beneficial mutual partnership with businesses. It's done either by imposing “contributions” (for the funding and development of his social programs) in exchange for benefits given to the businesses, and/or by collecting levies from corporate net gains in the form of CSR (Corporate Social Responsibility). Both, can be seen as levy systems, which are more directed and measured thus more effective to achieve its intended result, and more beneficial for the stakeholders. Sensibly you do not want to kill businesses merely in the name of “social justice”. It appears that they understand not to punish businesses or the “rich” (who potentially have the means of furthering investments and creating businesses) with ridiculous high taxes; to the point that there will be no social justice but instead social-injustice due to the impact of less growth, less jobs, smaller tax income base and therefore, less ability to fund the necessary social programs.

Another important thing is the handling of government incomes and their disbursement with strict transparency, free of corruption and accountability. So far, they have been done and must be done under the watch of Governor Basuki.

In addition, there is one interesting concept of Governor Basuki with regard to the understanding of Social Justice. He said, “ada perbedaan dasar antara bantuan - sosial dan keadilan - sosial”. What he meant was, according to him, that there is a profound difference between merely distributing handouts in the name of humanity or socialism, versus providing tools and creating opportunities to elevate the weak and the poor to an equal level of playing field. Mr.Basuki’s social policies are geared toward the latter which he said, is in line with the spirit of Pancasila. There is a profound philosophical differences between Governor Basuki's Social Programs and the Scandinavian Socialistic Countries Social Programs, including the US Social Programs.

Will Governor Basuki T.Purnama be successful with his Social Programs?

If governor Basuki can overcome all of the challenges listed above and there’s a safe and conducive political environment based on the five principles of Pancasila, I would say with great certainty that his Social programs shall work successfully when executed humanly but with great accountability and transparency in a corruption free environment. It then may also become a showcase of a successful model for the whole nation and perhaps the world to see.

From my two previous postings we now have learned that there are a Centralized Marxist Socialism and a Democratic Socialism. Shall we call this one in Indonesia, a Balanced Socialism or a Reasonable/Sensible Socialism or better yet, Pancasila Socialism? I think I like the last one the best!

For comparison with Democratic Socialism, please click the following link "Democratic Socialism and It's Challenges"

For having a perspective about Socialism itself and its potential drawbacks, please click the following link and read about "Is Socialism the Road to Totalitarianism or Communism?"