Is Indonesian an easy language?

Last year, a bunch of talented and motivated young Indonesians and Australians formed an organisation named the National Australia Indonesia Language Awards (NAILA) to foster the development of Indonesian language learning in Australia through running an annual speech competition.

I entered the Executive category of the first ever NAILA speech competition last year, and was honoured to be chosen as the winner. You can see my rerecorded speech below, kindly recorded and edited by Klirkom*. 

I was very impressed by the NAILA team, and their creativity and dedication to put together an initiative like this. I also enjoyed meeting the team, and the winners of the other categories. I was particularly impressed by the fact that most of the other winners had never even been to Indonesia, yet had the diligence to learn to quite a high level. I have only ever successfully learnt languages to any degree of competence when I was surrounded by native speakers!

Entries are now open for NAILA 2016, and they have a range of categories from primary school, to executive, room for creativity, and even a new category for native speakers. If you want to test yourself, I would encourage you to apply; or pass it on to others who might. All of the information you need to apply is available at their website: www.naila.org.

As to the question posed in the title to this blog post: Is Indonesian an easy language? Well, you'll have to watch the video to find out what I think!

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* If you're thinking of applying, please don't be put off by the fact that it's professionally shot! My very poorly lit winning entry was shot in my bedroom, with my daughter crashing around in the next room!

What’s worse than paying peanuts and getting monkeys?

I’m currently in the market for a motorbike helmet. I was shopping around the various options in Jakarta and was frustrated by the lack of reliable information about safety standards available to me to inform my purchase.

The frustration I felt is by no means unique to me, nor to the problem of buying motorcycle helmets. In fact, it’s an example of something that is quite the hot topic in development economics these days, so I thought I’d write about it.

Lack of reliable information for consumers harms the economy as a whole

I’m not the sort of guy that places a high premium on brands, and I try not to buy into the idea of conspicuous consumption. I generally try and go for the cheapest product that meets my needs. In the case of a helmet, that means providing an adequate degree of protection to the contents of my skull, in the event that I were ever to need it while riding my motorbike.

When I was looking for my helmet, I noticed a huge range of prices available. People were selling helmets that, to my very untrained eye, looked very similar for prices ranging from IDR 3-4 million, to less than IDR 100,000.

Some of these things are not like the others

In English, we have a saying: if you pay peanuts, you get monkeys. A similar one is: if you buy cheap, you get cheap. In short, it means, if something is cheap, there’s probably a reason for it, and that reason may be that the quality is poor. In Indonesian a similar distinction is made between murah meriah (cheap and cheery), and murahan (cheap and nasty).

The problem is, the converse is not always true. High price doesn’t necessarily denote high quality. The only thing worse than paying peanuts and getting monkeys, is paying real money, and still getting monkeys! There are plenty of examples of this, including bottled water in places where tap water is perfectly drinkable, or where people drink expensive wine at all.

So, when I was looking at the helmets I wanted to buy a quality one, I was wondering: would I be paying for true quality, or for the illusion of quality?

Government regulation to the rescue!

Helping consumers get what they pay for is one of the things that almost everyone can agree is the job of government. Even the nuttiest of small-government libertarians accept that we need a government to protect against fraud. Well, maybe not the nuttiest ones...

In the absence of a government holding people to account for misrepresenting the quality of motorcycle helmets, you have to expect that there will be unscrupulous firms misrepresenting the quality of their helmets, if there is a dollar to be made doing it.

In a world were fraud is unprosecuted, the money transferred to fraudsters, and the time and money spent by individuals trying to verify quality for themselves with only the tools and knowledge available to them as an individual represents a market failure. It is cheaper and more effective for some sort of centralised body to set, test, and enforce standards. The centralised body doesn’t necessarily have to be a government, there are cases where industry associations perform this function adequately, but in many cases, people are sceptical of an industry’s ability to regulate itself and government oversight is required.

My lack of certainty in the Indonesian motorcycle helmet industry’s ability to deliver me a quality helmet at the right price is due to my lack of confidence in what development economists call Indonesia’s instutions.

Institutions have been arguably the hottest topic in development economics for the past decade or so. This paper by Acemoglu (one of the key proponents of the idea), Johnson and Robinson gives a comprehensive treatment, while this one from the World Bank, also by Acemoglu and Robinson, gives a slightly updated view. Ha Joon Chang takes a slightly more sceptical view here, but his scepticism is more about the policy recommendations of people like Acemoglu than the idea that institutions are important.

The big idea of instutional economics is that poor countries aren’t poor because they haven’t got any money (or, at least, it’s not just that), a large part of why they are poor is because their institutions don’t let them use what resources they do have efficiently.

In Australia, I wouldn’t have such a big problem, because we have a range of institutions in place that set standards for motorcycle helmets (Standards Australia, here), and test them (the delightfully named Consumer Rating and Assessment of Safety Helmets, or CRASH), and punishes companies that either sell or manufacture helmets that don’t meet standards (the Australian Competition and Consumer Commission, or the ACCC, here). They’re not perfect, but they have been doing it long enough and competently enough that retailers and manufacturers of motorcycle helmets (and other providers of goods and services) have a reasonable degree of certainty that they will get in trouble if they fundamentally misrepresent the quality of their product.

In Australia, relatively secure in my trust in our institutions, I’d just buy the cheapest helmet that met the standards, and be on my bike. From what I can see, it seems like the cheapest ones in Australia retail for about AUD 100, or around IDR 1 million.

In Indonesia, some of these institutions exist, such as the Badan Standardisasi Nasional, and the Yayasan Lembaga Konsumen Indonesia, and the Komisi Pengawas Persaingan Usaha, but I don’t think it’s too unfair to say that your average seller of cheap helmets on Tokopedia doesn't worry too much about the wrath of any of those institutions.

In Indonesia, standards do exist for helmets set by the Badan Standardisasi Nasional and, in theory, all that meet those standards should have an SNI stamp on them. Despite this, there are plenty of helmets for sale on Tokopedia, and through plenty of other retailers including major hardware stores and grocery stores that claim to have SNI helmets for sale for IDR 100,000 (AUD $10), or less.

SNI for IDR 80,000? Really?

When development economists use the word “institutions” they don’t just mean BSN, YLKI, and KPPU, they mean every single piece of Indonesia’s economy that contributes to the delivery of helmets to consumers, and governs the use of those helmets by consumers. This includes everything from the institutions I mentioned, to plastics manufacturers, to trucking companies, to the traffic police that are meant to check that motorcyclists’ helmets meet standards, to the court system that is meant to prosecute people that put fake stickers on helmets, to the individual consumers themselves who don’t demand or even expect helmets with legitimate SNI stickers, and so on, and so on.

The fact that I can see a helmet for sale on Tokopedia for IDR 80,000 makes me question the ability of the entire network of institutions that make up Indonesia’s motorcycle helmet industry to deliver me accurate product quality information.

So, what can we do?

One of the lessons that we have learnt in development economics over the past few decades is that solving the problem is not as simple as just saying “oh, it’s the institutions", and walking away. Given the complexity of the networks of institutions that are involved in delivering goods and services to consumers, it’s naïve to think that a single policy change, or the establishment or reform of a new institution will magically turn the Indonesian motorcycle helmet industry into the Australian motorcycle helmet industry.

Sometimes it is the case that a particular regulation, policy, or institution is acting as a key constraint, so reforming it can make a material change. But the biggest thing that creates change, and development in institutions is time. Over time, each of these individual small reforms, and the actions of the regulators, contribute to changes in the expectations of consumers and producers, which will eventually lead to consumers being delivered better quality helmets at more appropriate prices.

People can often forget that societies like Australia are built off a set of institutions that have been under development under a relatively stable system for over 200 years; and even those institutions are based off developments in the UK for going-on 500 years. By contrast, Indonesia’s institutions have undergone at least four major periods of upheaval and fundamental redesign in the last 70 years; the latest of which was less than 20 years ago!

Despite this upheaval, Indonesia does have the institutions in place that should, eventually, deliver a market for motorcycle helmets that is functionally equivalent to Australia’s. And, given where Indonesia have come from, they’re doing about how you’d expect. They could be better, but they could definitely be worse!

While I’m waiting for the institutions to change, I’ll try and do my part as a consumer by communicating my desire for good quality at an appropriate price… I ended up going through a small, but reputable company, and I bought a helmet that cost IDR 1 million: about what one that meets Australian standards costs in Australia. I don’t have any guarantee that it does meet Australian standards, but at that price, at least there’s a chance that it does! 

The importance of disclosure in major infrastructure projects

I enjoyed this article by Marcos Siqueira, from the World Bank's Handshake Journal on public private partnerships, titled "What if we disclosed everything? Reactions to a radical proposal".

He sets out a really nice argument for transparency in public contracting, especially in developing countries that have governance concerns.

“The crude truth is that opaque PPP policies serve a lot of interests, but almost none of them benefit service users or taxpayers. Here are some of the key points on transparency in PPPs, from my perspective:

First, much of the developing world faces complex governance challenges. Fairness issues haunt the day-to-day life of procurement processes. PPPs are very big projects, subject to sophisticated risk allocation mechanisms, and governments do not always have the capacity to fully understand the consequences of the contracts, which only increases the level of illegitimate interests surrounding projects. Therefore, in my opinion, unfortunately opacity is the best way to protect those interests.

Second, opacity feeds inefficiency, even when no explicit governance issues are present. The long-term nature of PPP contracts make managers want to protect themselves. After all, valid information can be a very powerful tool for users to push for contractually determined service levels to be effectively delivered, and for the government to use its regulatory tools to monitor costs and quality. I understand why contract regulators and private sector infrastructure operators prefer that service users do not have adequate information: they feel less pressure.

Third, opacity stimulates opportunistic behaviors, both of government and of the private sector. I have noticed around the world that parties often enter into agreements knowing all too well they will break it (or try to change it) as soon as they can. Opacity helps keep watchdogs at a safe distance, and creates an adequate environment for discretionary changes to a contract that might push it away from its original objectives. So the more opaque the practices, the more difficult it is to enforce a contract in the long run.”

— Marcos Siqueira, What if we disclosed everything? Reactions to a radical proposal.

He goes on to say that "From my perspective, a full, radical, proactive transparency policy is the single best and least-expensive strategy to reduce the influence of those interests in the PPP project cycle. The transparency policy (see examples from PPPIRC) should include, at least, the unrestricted disclosure of:

• Unredacted contracts
• Associated financial deals
• Unredacted bids
• Unredacted amendments
• Performance reports
• Financial data of the project company
• Fiscal commitments and risks"

But this is far from something that World Bankers and international policy advisers like myself try and impose on developing countries alone. At least in my case, my home jurisdiction practices what I preach.

Since 2007, the Victorian Department of Treasury and Finance has been publishing project summaries of every PPP project they enter into. And, in many cases, they even publish the unredacted contracts, as suggested by Siqueira. 

If you are interested in seeing what a real project agreement looks like, I do recommend taking a look through some of the contracts on the Victorian websites. Interesting ones for me are the City Link Concession Deed, and the sale deeds of all of our old power plants; which incidentally, worked out pretty well for the government, given the disruptions created by rooftop solar, among other technological changes...

After you've had a look at the concession deeds, most of which are well over 100 pages, you'll appreciate the effort made in producing project summary documents, which lay out most of the relevant information from the agreements, plus a lot more relevant information in a much more reader-friendly way.

The Victorian Desalination Project is a nice case study that shows how a government goes through the process of confirming that the project is needed, and that the private option creates value relative to the public option. The project summary document reports it was estimated that the winning bidder's price saved the government almost a billion dollars in present value terms.

The State Government of Victoria, through Partnerships Victoria was at the vanguard of developing manuals and training materials that form a lot of what is considered "international best practice" in managing private participation in public service provision. In some cases, developing countries adopted what they understood to be "international best practice" without understanding that they lacked certain key capacities or institutions to implement them. A lack of regulatory capacity is one key constraint for developing countries in particular.

Indonesia is still a reasonable distance from the State Government of Victoria's model of transparency. If you google around, you can find some excerpted or redacted power purchase contracts for PLN, but not much else is publicly available. 

Like Siqueira, I struggle to see the public interest in keeping such contracts confidential. As he notes: "I have been challenged that there are legitimate commercial secrecy concerns that indicate the need to keep information away from the public’s eye. My view on this is that the same lack of transparency required to keep commercial secrecy also serves to hide fairness issues during procurement, protects inefficient organizations from scrutiny, and creates difficulties for contract enforcement."

While many have learnt the hard way to be wary of swallowing developed country best-practice whole, enhanced transparency is hard to argue against in almost any jurisdiction. Indeed, it is arguably more critical in places like Indonesia.

Do governments deliberately over-state the cost of transport projects?

Lest anyone think that Indonesia is the only country struggling to provide and finance infrastructure, this article on Alan Davies' great blog, The Urbanist, covers the struggles that governments in Australia have in deciding what infrastructure to build and coming up with sensible cost estimates as inputs into that decision-making process.

There is often a pervasive myth that, if only we had the data, less corruption, or smarter politicians, we could find some perfect solution that would make everyone happy, grow the economy, fight poverty, and drive gender equality. Those things would certainly help, but there's still a whole lot of the problem that is hard in any country, not just Indonesia.

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Note: If you're interested in these issues, The Urbanist is a really great blog to sign up to. He deals almost exclusively with Australian urban issues. But, even if you're not Australian, the way he breaks down the problems is applicable to any context. A good chunk of my blog is basically my impersonation of him!