Monday, November 21, 2005

Indonesia take De Soto's advise

I should say this is a damn good start. It is no panacea for the complicated legal and property system in the country, but that would be an initial capital to improve the economy. Suddenly I remember Hernando de Soto with his famous book The Mistery of Capital: Why Capitalism Triumphs in the West and Fails Everywhere Else. (It has Indonesian language translation)
De Soto didn't mention in the book about the complicated ID (Kartu Tanda Penduduk or KTP in local term). I imagine the single identification number would be the first organized property owned by Indonesian. Some technical problems are questionable, especially to make sure that nobody would own two numbers, but it could be settled.
Below is the excerpt of an interview of De Soto with The Region, a publication of the Federal Reserve Bank of Minneapolis, Minnesota.
And when I was in Bali, your ambassador (US Ambassador) to Bali (Indonesia) called me and said that (president) Suharto and his Cabinet would like to see me if I'm available, because they know we're doing all this work on property rights in Peru. So, I went to see them. And they said, don't talk to us about the virtues of property; we know the virtues of property—most of them were, as a matter of fact, Ph.D.s from Berkeley and UCLA—we want to know how it gets done, because we figure that 92 percent of our people don't actually have property, they just have possessions. But start off with something concrete. How do you know who owns what? That was the concrete question. In other words, you've got all these masses of people; how do you warrant a property type in a systematic way to 160 million people (now 220 million)? You need systems.
And so, if I had to give them a long-winded reply, which means putting out my flow charts, it would have been impossible and I would have lost their attention. With politicians, you lose their attention very quickly. So a metaphor came into my head. And I said look, I've just been in Bali, that beautiful island, and all I've done during these 16 days is walk up and down Bali—because that's all you can do in Bali. It's got these rice fields and these palm trees and these pagodas, and I just kept on walking with my wife. We always knew when we changed properties because a different dog would bark. Therefore, all the information you need is in the hands of Indonesian dogs. So, get the Indonesian dogs organized. And everybody understood it. And then, of course, one of them said, "Hukum Adat," the people's law.
Basically, wherever we go, we find the symbol of the dogs barking; people have agreed on some form of law on how they're going to relate to each other regarding their assets. And what we do is we try to build up a legal system of property that is based on the realities already on the ground.
Main conclusion of the book is actually that arrange property rights (including the identification number) is not to have people's property connected each other but to have people connected. I hope that would happen to the identification number too. Please don't wait barking dogs arrange our chaotic ID system.



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