Thursday, September 13, 2007

ASEAN 2: Regional Meetings, Indonesia's Military Businessmen

The Association of South East Asian Nations (ASEAN) is turning 40 years old this year. From a military alliance of some SEA countries, it has morphed and evolved into a dynamic economic bloc in this part of the world.

I think that without the persistent inclusion of their 3 rich neighbors in the north-east, namely China, S. Korea and Japan (what used to be "ASEAN + 3"), many heads of states of ASEAN-member countries could be dragging their butts on the issue of trade and investment liberalization. Our "rich confucian neighbors" have a very strong confucian ethic of hard work and entrepreneurship, values that somehow infect the businessmen and some politicians/bureaucrats of the laggard ASEAN member countries.

Of course a number of member-countries of ASEAN have their own dynamism themselves, their own ethic of hard work and entrepreneurship, like the Thais, Malaysians and Singaporeans.

Now, ASEAN has attracted more countries to become its "regular observers" in its annual summit meeting of its heads of state. It's now "ASEAN + 6" (China, Japan, S. Korea, India, Australia and NZ). Outliers like Myanmar and possibly Laos, should be dragged upwards economically along the way.

ASEAN meetings are plentiful. For instance, this year, the Philippines hosted at least 3 important ASEAN meetings: (a) ASEAN summit last January in Cebu, (b) ASEAN Ministerial meeting last July in Manila, and (c) ASEAN Economic Minsters Meeting last August in Makati.

Us Filipino taxpayers do not know how much from the money confiscated from our monthly earnings and from the taxes on the goods and services that we buy, were spent on all those expensive meetings. In addition, when these officials and bureaucrats come, we're like 3rd class citizens and motorists in our own country, judging from the way our local policemen and traffic "enforcers" edge or wipe us away from the roads when the cars and convoys of these bureaucrats would pass by.

Government bureaucrats -- national, regional, multilateral -- they think we owe the world to them. They suck.

I wrote this last June 21, 2006:

Indonesia's Military Businessmen

Can soldiers be good businessmen? And that they can own or control more than a thousand companies in a poor country?

Well, the Indonesia military think they can, and so they own until today more than 1,500 companies in Jakarta, of which only about 6 of them are profitable. A story from the Financial Times today, June 21, "Indonesian military to divest some businesses" (By Shawn Donnan in Jakarta), says that

"Indonesia is scaling back plans to force its military to unload its business interests... Indonesia’s parliament in 2004 passed a bill requiring the powerful military, known as the TNI, to unload all the businesses it controlled within five years. Advocates of reform have long accused the TNI’s network of legal and illegal businesses of contributing to corruption, illegal logging and other crimes and of complicating life for foreign companies looking to invest in south-east Asia’s biggest economy.

"But in an interview with the Financial Times, Juwono Sudarsono, Indonesia’s defence minister, said Jakarta now expected to be able to force the military to divest just “six or seven” profitable businesses of the 1,500 it controls.

"The main reason for that, he said, was the 'meagre resources' of Indonesia’s defence budget with the civilian government providing just 48 per cent – or $2.8bn – of the 'minimum budget required' by the military."

This is the issue: soldiers are trained to fight wars, to control and defeat armed enemies of the state, both domestic and foreign. They are not trained in the detailed art of cost-minimization, revenue-maximization, and profit-optimization of business in a competitive environment. Very likely, military generals can make profit for their companies not in a competitive environment; they only make profit because they get all forms of subsidies from taxpayers, and various forms of protection from competition that deprive taxpayers of other choices.

In this case, the Indonesian (or other countries') "military-businessmen" are only moving in a dirty and vicious cycle: business through protectionism and endless subsidies results in a bad business environment, that discourages more private entrepreneurship, that shrinks potential tax revenues, that shrinks potential budget for various government services including defense, that makes them retain "military-businesses" that just live off on protection and endless subsidies...

The sooner that "military businessmen" (a contradiction in terms in the first place) realize this, the better for itself and the Indonesian economy. But the more they procrastinate in letting go of military business interests, the more inefficiencies and wastes they will inflict upon their countrymen.

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