Comparing Politics and Economy of Indonesian and Singaporean - Essay Example

? Indonesia and Singapore – Corruption and economic development in the post-2008 period A comparison paper between Indonesia and Singapore – Corruption and economic development in the post-2008 period When having to compare the performance of countries in the context of the international community, emphasis should be given to specific issues: economy and political choices are the most common criteria for evaluating the power of countries and their potential to secure their growth in the future. Current paper focuses on the political and economic environment of two South East Asian countries: Indonesia and Singapore. Reference is made in particular to the criteria on the effectiveness of these two countries in fighting corruption and on the measures taken by them for securing their economic growth in the period that followed the recession of 2008. The literature published on this subject reveals that both countries have potentials to achieve a long term growth; however, the high level of corruption, as appearing in both Singapore and Indonesia, sets important barriers to their economic development. Cameron et al. (2005) developed an empirical study in order to explore whether corruption has different characteristics in countries with different cultures. The study was based on data related to India, Australia, Singapore and Indonesia. Corruption has been found to be critical for the economic growth of countries; in fact, as noted in the study of Cameron et al. (2005) corruption can severely threaten a country’s growth primarily by leading to the limitation of investment on various industries, a phenomenon that leads to the decrease of income in various economic activities across a country. Because of its potential to cause turbulences in the profits of a country’s industries corruption is often used as a term for evaluating the potentials of a country to secure its growth (Cameron et al. 2005). In practice, corruption has been defined as ‘a situation where two people can act to increase their own payoff at the expense of a third person, the victim’ (Cameron et al. 2005, p.2). The study of Cameron et al. (2005) has been based on the rule that the attitudes of people towards corruption is not standardized but it can highly differentiated depended on the social, economic and political environment involved. Another fact that has been found to impact people’s attitude towards corruption is ‘their personal experiences on corruption’ (Cameron et al. 2005, p.3). The findings of the study of Cameron et al. (2005) are quite important for understanding the differences and similarities to the practices used by Indonesia and Singapore in regard to corruption. Traditionally, Indonesia has been included in the list of highly corrupted countries; in the relevant index Indonesia tends to achieve a score of 1.9, being at similar level with India (Cameron et al. 2005, p.3). As for Singapore, the particular country has become known for its high performance in fighting corruption: the most recent score of Singapore in regard to corruption has been 9.4, based on a 10-level scale; this is an exceptional score in regard to the control of corruption across the country (Cameron et al. 2005, p.3). The evaluation of Singapore and Indonesia in regard to their ability to fight corruption should be based on the following fact: in Singapore, the government has emphasized to the limitation of corruption by introducing a series of strict laws; this practice has discouraged those who supported corruption across the country (Cameron et al. 2005). Indeed, during the last 40 years the control over corruption in Singapore has been impressive; today, the country is among ‘the least corrupted countries worldwide’ (Cameron et al. 2005, p.3), as explained earlier. In Indonesia, corruption has been traditionally a severe economic and political problem. The lack of initiatives by the government’s side has led to the expansion of the problem, making the country one of most vulnerable internationally in regard to corruption (Cameron et al. 2005). However, in 1998 the governance system of Indonesia was changed; democracy was established in the country a fact that allowed, for the first time, the introduction of measures for fighting corruption in all aspects of economic and political life (Cameron et al. 2005). Since then, the country’s efforts to control corruption have been significant but there are still gaps to be covered so that the effectiveness of the country in fighting corruption to be increased (Cameron et al. 2005). The study of Cameron et al. (2005) has been based on a non-computerized game in which students from four universities, based in the countries involved in the study, were asked to participate. In total, 1935 students accepted to participate in the research project (Cameron et al. 2005). The findings were analyzed using regression analysis. The results reveal that the attitude of people towards corruption is not standardized. More specifically, the participants from Indonesia showed similar level of tolerance towards corruption with participants from Australia, a country where corruption is quite limited (Cameron et al. 2005). Indeed, it was proved that participants from Indonesia are likely ‘to accept and offer a bribe at the same level with participants from Australia’ (Cameron et al. 2005, p.16). Of particular importance are the findings of the study in regard to participants from Singapore: it was revealed that those participants are more likely ‘to accept and offer a bribe’ (Cameron et al. 2005, p.18) compared to the participants from Australia. In other words, the participants from Singapore were proved to have higher tolerance to corruption compared to people from Indonesia. This finding reveals the potential power of culture to influence people’s attitude towards corruption; it also reveals that the success of a government in regard to the fighting against corruption is difficult to be secured. In Indonesia where the efforts of democratic government, from 1998 onwards, to fight corruption are continuous and intense people are more aware of the implications and the negative effects of corruption than in Singapore where the fighting against corruption is not a priority for local government, probably believing that the battle against corruption has been finished. According to the issues discussed above, Singapore and Indonesia are at similar levels in regard to their performance in fighting corruption, even if the ranking of the two countries in terms of corruption is different. The above finding should be taken into consideration when evaluating the performance of countries in regard to their economic development. Jordan (2009) explored the effects of the recent recession, that of 2008, on the economy of Singapore. Singapore’s critical position in the global market cannot be doubted; the particular city-state is considered as one of the most powerful economies worldwide, an achievement which is mostly related to the extremely high performance of the manufacturing industry, as followed by high levels of investment (Jordan 2009). However, the recession of 2008 caused severe turbulences in the city’s economy, a fact that revealed the high exposure of the local market to risks related to the international market, i.e. the low level of the city’s economic independency (Jordan 2009). Indeed, at the end of 2008 the GDP of Singapore reduced by ‘12.5%, a decline that has never appeared in the country since 1976’ (Jordan 2009, p.97). The decline in the country’s GDP was continued in 2009, Figure 1 below, a fact that also revealed the inability of the local government to take measures for stabilizing the economy (Jordan 2009). Figure 1 – GDP’s performance in Singapore, from 2006 to 2009 (source: Jordan 2009, p.98) The government of Singapore has emphasized on the construction sector, where investment by government was significantly increased (Jordan 2009). This practice helped the city’s economy to be stabilized; up to the beginning of the recovery of the city’s manufacturing sector the increase of investment on the construction sector helped to control the decline in the city’s GDP (Jordan 2009). The specific practice of the city’s government can be characterized as quite effective taking into consideration the fact that Singapore is ‘an open economy, meaning that it is highly exposed to changes in international market’ (Jordan 2009, p.99). At this point, the following issue should be discussed: as already noted, Singapore’s economy is highly based on manufacturing. The specific industry has been highly affected by the global recessions, especially those of ‘1998, 2001, 2003 and 2009)’ (Hui 2013, p.107). As a result, the industry’s unemployment has been increased, a fact that has contributed in the decline of the city’s GDP (Hui 2013). In this context, it could be supported that economic growth in Singapore could not be achieved without specific measures for facing the continuous increase of unemployment rates (Hui 2013). In Indonesia similar challenges seem to exist in regard to the development of the country’s economy. Tambunan (2010) has tried to identify the effects of 2008 recession on the economy of Indonesia. According to the above researcher Indonesia is a country that has been traditionally highly based on exports, in regard especially to ‘mining and agriculture’ (Tambunan 2010, p.2). In the years that followed the transition of the country to a democratic style of governance, i.e. from 1998 onwards, the exposure of the country’s economy to the changes in the global market has been increased (Tambunan 2010). As a result the potentials of Indonesia to face the pressures resulted from the crisis of 2008 have been limited, mainly due to the following facts: a) the country has been highly based on the income from exports; since 2008 this income has been decreased, b) Indonesia’s needs for certain products, such as rice, meat and vegetables are high; after the crisis of 2008 the price of these products has been increased, a fact that affected the economy of the country; c) a high percentage of the population has chosen immigration for securing family income; this has led to ‘the high dependency of the country from remittances, which have been decreased in the post 2008 period’ (Tambunan 2010, p.2). The overall effects of 2008 recession on the economy of Indonesia are presented in Figure 2 below. In Figure 3, the effects of the 2008 recession on Indonesia economy are revealed through the data presented in regard to the changes in Indonesia’s exports and imports from January 2008 to June 2009. In the above graph a trend for stabilization in the country’s imports and exports from February 2009 onwards is made clear. Figure 2 – Effects of 2008 recession on the economy of Indonesia and of other countries (source: Tambunan 2010, p.3) The above graph shows the chain in income, as generated from exports, one of the key sectors of Indonesia’s economy. The graph shows clearly the strong dependency of Indonesia’s economy on two factors: a) the world demand for its products and b) the remittances sent from other countries. Figure 3 – Imports and exports in Indonesia, from Jan 2008 to June 2009 (source: Tambunan 2010, p.3). The responses of the Indonesia government towards the challenges of the 2008 crisis can be characterized as quite satisfactory. More specifically, the country’s government has managed to limit the effects of the 2008 recession on the economy by employing a series of practices: a) emphasis has been given to the banking sector of the country; the performance of this sector has been kept at high levels, controlling losses because of the 2008 recession, b) consumer prices have been kept low; in this way, the buying potentials of local people have not been highly affected by the 2008 recession, c) the country’s government has kept public finances at a high level, a fact that has allowed the country to avoid delays in responding to its financial obligations (Tambunan 2010, p.16). Singapore and Indonesia seem to be countries with different political and economic structure: Singapore has been traditionally an open economy, based on democratic style of governance and with a notable position in the global market. As for Indonesia, its transition to a democratic regime, in 1998, set the basis for the transformation of the country’s political and economic life. Between the two countries, Singapore is considered as more trustworthy with more prospects for further economic growth. However, the review of the literature and of the findings of relevant empirical research revealed that the potentials of Indonesia for growth are more, a fact that is reflected to the initiatives taken by the country’s government to face the challenges of the 2008 recession. In addition, the people of Indonesia seem to be more aware of the effects and the risks of corruption, a fact that further verifies the effectiveness of the country’s government in securing economic and social growth. References Cameron, L., Chaudburi, A., Erkal, N. & Gangadharan, L. (2005) Do Attitudes Towards Corruption Differ Across Cultures? Experimental Evidence from Australia, India, Indonesia and Singapore. Department of Economics, University of Melbourne. Retrieved fromhttp://www.econ.canterbury.ac.nz/downloads/attitudes_towards_corruption.pdf Hui, W. (2013) Economic growth and inequality in Singapore: the case for a minimum wage. International Labour Review, 152(1), 107-123 Jordan, R. (2009) Singapore in Its Worst Recession for Years. The Effects of the Current Economic Crisis on the City-State’s Economy. Journal of Current Southeast Asian Affairs, 28, 4, 95-110. Tambunan, T. (2010) Socio-Economic Impacts of the Global Economic Crisis: The Indonesian Story. Afro Asian Journal of Social Science, 1(1), 1-19 Read More