Friday, June 24, 2005

Coordination razzle-dazles: infrastructure

Over at a discussion on JBIC's new survey results on Japanese companies' perception on Indonesia as future production base in the region, a debate arose around the poor infrastructure condition. A spokesperson from East Jakarta Industrial Park blamed the government for not giving priority to improve the road condition to facilitate better logistics from industrial park to the port. The government's national planning bureau (Bappenas) denounced the charge, saying that they did have "concrete plans" (what's "concrete plans"?) to develop better access from the park to the port. However, when they were about to implement the plan, they found out that the state-owned company responsible for managing toll roads, PT Jasa Marga had already have a contract plan with some private companies. So --bear with me-- the Bappenas could do nothing about it. As to why even the Jasa Marga had not realized the plan was a mystery to the audience. We only knew that, given all the "concrete plans" they have, the government officials seem to value grandiose, ivory-tower event like the Asian-African Summit highly above infrastructure improvement. In fact, a source told me that the money had been rerouted to develop the new toll road to serve the summit's VIPs. Yes, the new toll road now also serves commuters from Jakarta to Bandung (or the other way around), but at the same time it creates severe bottleneck for the flow of export goods coming from Cibitung, Cikarang, Kerawang, and Cikampek (the industrial parks) to Tanjung Priok (the shipping port). [One of ongoing research in LPEM now is to identify logistics inefficeincy in export industries. Surely, this would be a very important issue].

But, continuing on my frustation yesterday, it simply appears to me that the government really has coordination problem. Mind you, Bappenas is government. Jasa Marga is state-owned. Sounds familiar?

Wednesday, June 22, 2005

Coordination razzle-dazle: oil

Pick any national newspaper these days. They all talk about the happening oil crisis in Indonesia -- once known as an oil exporter. We knew it's coming and we would have suggested higher price to help anticipate that. But that's aside for now (calm down!).

What really bothers me from all the news is the mess in coordination. The state-owned oil company, Pertamina blames it on the government, and the government via the Ministry of Finance fires back to Pertamina. In the meantime, the state-owned energy company, PLN blames the government for not backing them up when they are short to pay the supply from Pertamina. Pertamina refuses to supply since it is not "appropriately subsidized" by the government. The Minister of State-Owned Enterprises seem confused. And there comes Pertamina-Exxon dispute. Cepu is supposed to produce one tenth of the national oil output. That's a lot, especially in these tough days. But the government seems lame in solving the dispute.

What in the world is going on? Do we not have that function we usually call "coordinating" minister? If the government really can't manage itself, isn't it a justification for more privatization? (Oh by the way, I was told, the coord-min wants privatization; it's only that, some ministers are strongly against it).

And, to add to my frustation: Speaking about oil, this is a piece (in Bahasa) by an adventurous politician sometimes calling himself an economist (I was a big fan of his writings -- not anymore after his pieces like this and this) and now trying to wash his dirty hands, using angelical words. I'm disgusted.

Friday, June 17, 2005

Fine survey, poor inference

In a seminar on decentralization yesterday, a team from the World Bank presented their survey result done with Gajah Mada University. The "most comprehensive study of the impact of decentralization on the quality of public service to date" concluded that "autonomy leads to improved public services". Well...

I'm not against decentralization. In fact, I like the idea of decentralization. But I have problem with the inference drawn by the research team -- or rather, on the way the team drew their conclusion. Look at their questionnaire here. One question to -- supposedly -- capture households' perception on decentralization, i.e. "local autonomy" is

"Local economy is currently undergoing since 2001. In your opinion, how is the quality service [sic] of [...] in the district/municipality compare to year 2000?" The items for [...] are school, puskemas (health clinic, head of village, sub-district office, and district/municipality office. The options for responses are 1) Worse, 2) Same, 3) Better, and 4) Don't know.

Now, from that kind of question, do you dare to make an inference about the effect of autonomy on public services? I would not.

Try another one:

"In you opinion, how is the quality of [...] program implementation in this district/municipality in 2001 compare with [sic!] year 2000?" The items include for example "poor people empowering" and the response options are 1) Decreasing, 2) Constant, 3) Increasing, and 4) Don't know.

Again, can this kind of question lead you to conclude that the autonomy or decentralization lead to improvement or disimprovement?

Probably yes, if you can find some way to isolate any possible other factors that might determine the change in "poor people empowering" etc. Just because many respondents said that "poor people empoering" is "increasing" is no justification to conclude that it was due to autonomy policy or decentralization, even though you picked up the relevant periods of time.

This is the same with the former question above. Just because majority of respondents said that the school quality is better in 2001 compared to 2000, you can't just conclude that it was because the autonomy/decentralization.

All that was presented yesterday was data frequency and percentages. No parametric treatment whatsoever. So, I was very surprised with such a strong conclusion.

It strikes me that people can rush to make inference that way. That is a dangerous approach to data.

Thursday, June 16, 2005

Credit, motorcyle, and interest rate

It's always good to talk with those really engaged in the ups and downs of the economy. At least two challenging issues I gathered from a friendly talk with Kim Eng Securities analysts. First, with regards to the decreasing role of private consumption in the total economic growth of 1Q05; I was offered insightful theory. That there's a changing consumer behavior triggered by extremely easy credit scheme for motorcycles. Average lower income household has a takehome pay for about Rp 1 million a month (USD 105). The easy credit tempts many of such household to buy motorcycles. They end up paying Rp 5oo,000 to Rp 600,000 (USD 53-63) each month. The leftover is really small, compared to the time where motorcycle credit is unaffordable. Hence the low private consumption number. I would add that the recent plan of Jakarta governor to develop special paths for motorcyclists in the city of Jakarta will contribute further to the skyrocketting of motorcycle sales. (My related post on this motorcycle credit, here).

Secondly, still related to that easy credit. It seems to my friends that interest rate really does not matter to the motorcycles buyers. They just require a credit scheme -- no matter how high or low the interest rate is. This is worth investigating. Since, "it is possible that the credit scheme is not a function of interest rate anymore -- it is the other way around!". This is really intriguing as well as challenging. If I have time and data, I'd love to test this hypothesis. (Students: want a good topic for thesis?)

Thursday, June 09, 2005

Old Soldier Strikes Again

Friedman -- THE Friedman, and that means: Milton -- strikes again. He calls for legalizing marijuana (i.e. replacing prohibition with taxation). Here's the story. Here's the list of signatories of a petition led by Friedman -- unlike what the story tells, not all of them are distinguished economists. Only a handful, of which Friedman of course stands out. Talking about this guy, he's just been interviewed here (via MR).

(Somehow I remember my wild idea last year to legalize the now-illegal logging using a strongly enforced tax mechanism)

Monday, June 06, 2005

Freakonomist Has New Column

Recommended new column: Freakonomics goes to NYT. Here's the debut. How can you not like a reading like this:
"Chen is a hyperverbal, sharp-dressing 29-year-old with spiky hair. The son of Chinese immigrants, he had an itinerant upbringing in the rural Midwest. As a Stanford undergraduate, he was a de facto Marxist before being seduced, quite accidentally, by economics. He may be the only economist conducting monkey experiments..."

Friday, June 03, 2005

May's Inflation is Even Lower

BPS Press Release says:
"May 2003, was marked with 0.21 per cent of inflation. Based on the Consumer Price Index (CPI) calculation in 43 cities, inflation was experienced in 30 cities, while deflation happened in 13 cities. The highest inflation was in Palu (2.31 per cent), whilst the lowest inflation was in Palangkaraya (0.01 per cent). Meanwhile, the biggest deflation was experienced in Padang Sidempuan (-1.09 per cent) and the smallest inflation happened in Bandung and Purwokerto (-0.04 per cent). The inflation was contributed by the increase in the prices of some goods and services groups as follows: prepared food, beverages, and tobacco products (0.01 per cent), housing (0.76 per cent), clothing (0.35 per cent), health (0.81 per cent), education, recreation and sports remained stable (0.00 per cent) and transportation & communication (0.03 per cent). Meanwile, unprepared food experienced a decrease as high as minus 0.28 per cent".
So, what do you say about the "terrifying impact of BBM price hike on inflation rate" now?

Meanwhile, some economists claim that BPS growth report is misleading. Since "it does not take unemployment into account" and "the fact is, consumption has been decreasing; why would then we have high growth?". Since when, we put un-employment into growth accounting? Since when, GDP is just consumption?

Wednesday, June 01, 2005

NR&Env Econ Exam

Technical Note: A friend who uses Internet Explorer told me that this post had weird notation. It was meant to be a footnote. I work with Mozilla Firefox and I don't see weird stuff coming out from my footnote numbering. But, as many of you still use IE, I now have "fixed" the problem by changing the number into an asterisk. My suggestion, however, STOP USING INTERNET EXPLORER! GET MOZILLA!

The Natural Resource and Environment Economics, final exam last week. This is somewhat a watered-down version of the mid-term --which turned out not to be very rewarding.

  1. What do we mean by efficient allocation of scarce water? Do you think we in Indonesia have allocated the water efficiently? Why? Do you have suggestion on how we should manage water use in Indonesia?
  1. What do you think of the “Global Scarcity Hypothesis”? Does it make sense? Why or why not?
  1. Should we privatize our forests? Why or why not? (For either case, please provide an economic argument, not a romantic one *).
  1. Explain again, why maximum sustainable yield can be a bad target for fish catching if the objective is to conserve the fish?
  1. Give me one reason why the government should intervene in supplying water. Elaborate on that. If you don’t think there is any single reason, argue.
*) Though, I’m not saying economics/economist can not be romantic!