* This is my article in BusinessWorld on February 12, 2018.
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“Bad times make good policy and good times make bad
policy. If you want to introduce important reforms, wait for bad times and the
politicians will listen to you.”
— Chatib Basri, former Indonesia Minister of Finance
That was among the important advice and reflections based
on experience given by one of the keynote speakers in the recent Asia Liberty
Forum (ALF) 2018 held in Mandarin Oriental Jakarta, Indonesia last Feb. 10-11.
Dr. Basri spoke on “How to do Reform in an ‘Imperfect World’: The Case of
Indonesia.”
The ALF is an annual liberty conference sponsored by the
Atlas Foundation (US) and co-sponsored by other organizations and independent
think tanks. In this year’s event, the local host and co-sponsor is the Center
for Indonesian Policy Studies (CIPS), a great and dynamic free market think
tank.
Dr. Basri is a friend since 2004 when I first attended
the Economic Freedom Network (EFN) Asia Conference in Hong Kong in October
2004, sponsored by the Friedrich Naumann Foundation for Freedom (FNF) and
co-sponsored by the Lion Rock Institute. I was impressed by his silent, cool,
and reflective composure.
He became Finance Minister from May 2013 to October 2014
when the term of former Indonesian president Susilo Bambang Yudhoyono was
completed. Upon his appointment, at least one Indonesian newspaper headlined
“Free marketer becomes Finance Minister.”
He started his presentation with this quote from Jean
Claude-Juncker, EU President:
“We all know what to do, we just don’t know how to get
re-elected after we’ve done it.”
Other statements he made in the ALF2018 were:
“One reason Indonesians are religious is because of the
Government. You submit your business application to the Government, then pray
to God.”
“We failed to explain the benefits of free trade to the
people. The success of Asia was the success story of globalization.”
“When political power is not favorable and limited,
create a success story which enables the people to see and experience positive
changes, pick one that is easy to implement but the marginal gain is high, then
move to more complex reforms.”
“To help the poor, Indonesia liberalised rice imports.
Prices fell.”
Another keynote speaker in day 1 was Suraj Vaidya,
Chairman of the South Asian Association for Regional Cooperation (SAARC)
Chamber of Commerce, also Chairman of the Samriddhi Prosperity Foundation in
Nepal.
Mr. Vaidja quoted Frederic Bastiat’s famous line, “If
goods cannot cross borders, soldiers will.”
That statement was true in the past, remains true in the
present, and will be true in the future. Trade is the best global peace maker
since people and goods crossing borders create goodwill among societies,
discouraging criminals, terrorists, and prohibited substances.
Both Dr. Basri (introduced and interviewed by Rainer
Heufers, CIPS executive director) and Mr. Vaidja (introduced and interviewed by
Ronald Meinardus, FNF Regional director for South Asia) mentioned the role of
free trade and free markets in fighting high inflation many goods and services
that are unaffordable to the poor.
And this brings us to the issue of controlling high
inflation in the continent.
Data from the last 12 years show that average inflation
rate has been declining.
For the ASEAN 8 for instance, it went down from 7% in
2006-2010 average to 4% in 2011-2015 average, and only 2.4% in 2016 but
slightly went up to 2.9% in 2017 (see table).
The rise in average prices in 2017 was partly due to the
rise in world oil prices.
For instance, the West Texas Intermediate (WTI), a grade
of crude oil used as a benchmark for pricing, went up from $43/barrel in 2016
to $51/barrel in 2017.
For the Philippines however, there was a spike in
consumer prices in January 2018. From 3.3% in both November and December 2017,
it went up to 4%.
Other countries with available data showed a decline in
prices by January 2018 except in India (was already 5.2% in December 2017),
Pakistan (4.6% in December 2017) and Taiwan (1.2% in December 2017).
So the Philippines is the “outlier” here, experiencing
higher inflation when most neighbors have declining prices. Why?
The most proximate explanation is the TRAIN law signed in
December 2017. While there is a decline in personal income tax rates, there are
tax hikes in oil products, sugar tax, among others.
The Philippines is entering a period of increasing
government intervention, taxation, and regulation. This is not good for the
people and private enterprises.
See also:
BWorld 184, ERC paralysis and implications for consumers, February 11, 2018
BWorld 185, Lower taxes via more mineral exports, February 06, 2018
BWorld 186, Land use bill and Asian urbanization, February 23, 2018
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