WELCOME: NEW MEMBERS

MIGRATION& THE WEALTH OF NATION

SOCIAL AND CULTURAL Effects of Domestic and International Migration

URBANISATION PROBLEMS IN JAKARTA

January 2011 ISSUE FOUR

Photos courtesy: Claas Morgenstern

Message from the EFN Asia coordinator I remember back in 2003, with exhilaration, I watched Johnny Wilkinson kicked the winning drop goal in the last minute! of the extra time! of the final Rugby World Cup! against Australia! Although he is a generally left-footed kicker, he kicked that goal with his right foot. He grabbed the ball, stood on his right foot, and dropped the ball. He then took a step forward and placed his weight on his left foot to free his right foot to make the kick. The only thing that this great man could do afterward was to watch the ball flew, hoping that it would go the direction that he intended. It is a fact of life that if one wants to succeed in doing something, one will need to understand what can be controlled, what can change and, most importantly, what cannot be changed. One will change what seems to be changeable and leave the unchangeable alone. There are many things in life that you think you have already planned it so well. Still, it turns out differently, if not terribly. Although a ball has no life, it has its own direction that cannot be controlled completely. This fourth issue of our LINK e-magazine was due last year. It somehow finds its own destiny. I cannot blame anyone or anything else but myself for the delay. When kicked the ball, I miscalculated my foot placement. This issue may not be kicked off for a winning goal. I hope that you still enjoy it and continue your supports. In this issue, you will find a short report on the last year’s conference and articles revolving around the theme of migration. We also take this opportunity to welcome new members of our growing family. With best wishes, Gorawut NUMNAK

2CONTENTS

LiNK

4 Migration and the Wealth of Nations

7 Social and cultural Effects of domestic and International Migration

13 QuoteJug

15 Urbanisation Problems in Jakarta

NEW individual members

Individual members FENG Xingyuan Prof Mao Shoulong YAO ZhongQiu Dr. Liu Junning Dr. Jianxun Wang Dr. Jianxun Wang Prof Bibek Debroy Dr. P.D. Kaushik Dr. Muhammad Chatib Basri Dr. Arianto Patunru Farhan Bokhari Prof Sirimal Abeyratne Dr. Kriengsak Chareonwongsak Cong Minh Nguyen Member institutes Cambodia Institute of Development Unirule Institute of Economics Lion Rock Institute Centre for Civil Society Liberty Institute Prabodh Freedom Institute

MEMBERS PARTNERS &

Indonesian Institute Centre for Free Enterprise Centre for Public Policy Stidies Institute for Democracy and Economic Affair Malaysian Institute of Economic Research EBI Think Tank Institute Samriddhi Federation of Pakistan Chambers of Commerce & Industry Alternate Solutions Institute Foundation for Economic Freedom Foundation for Enhancement of Revenues Center for Research and Communication Institute of Future Studies for Development Partners

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Prof Bibek Debroy

Prof Sirimal Abeyratne

Prof Mao Shoulong

NEW member institutes

4 Migration and the Wealth of Nations

The 2010 EFN Asia Conference ended on 9 October, wrapping up weeklong series of events – the Freedom Festival Indonesia – in Jakarta that highlighted the benefits of market economy and migration for all. The search for effective migratory policies is often hindered by the lack of a comprehensive and rational policy debate. “Today, we focus on the topic of domestic and international labour migration, aiming at passing a resolution by the EFN Asia, on how migration policies should be designed from a liberal point of view,” proclaimed Dr Rainer Adam, Regional Director of FNF, Southeast and East Asia office, in his opening remarks.

The preludes to the annual EFN Asia Conference included the ‘Freedom Academy’, the ‘Asian Youth Enterprise Forum’ and launches of several influential books that have recently been translated into Bahasa Indonesian (The Law and The Adventures of Jonathan Gullible: A Free Market Odyssey).

2010 EFN A

sia conference

The Freedom Academy was held on 1-3 October 2010 by AkebemicMerdeka.org, Atlas, the Friedrich Naumann Foundation for Liberty (FNF), in cooperation with the Freedom Institute. On 4-6 October 2010, Atlas’s Asian Youth Enterprise Forum gathered over 35 recent graduates, current students and young professionals from 14 Asian countries to discuss practical how-to and best-practice about spreading liberty in their respective countries.

The so-called Freedom Festival Indonesia closed with the annual EFN Asia conference, a major networking event in Asia held by FNF, the Indonesian Institute and the Freedom Institute, which began on 7 October 2010 at the Sultan Hotel, Jakarta. The conference attracted a diverse range of participants, with over 150 people attended from around the world.

The conference was officially opened by H.E. M. Syariefuddin Hasan, Minister for Cooperatives and Small and Medium Enterprise, the Republic of Indonesia, who also presented the current Indonesian economic progress. It is clear that migration has contributed significantly to Indonesia’s past and current economic developments. Following the opening session, three breakout sessions allowed in-depth discussion on the three key issues (macroeconomic effects of migration, safeguarding migrants and facilitating migration). Each session consisted of three plenary discussions.

On 8 October 2010, Dr Fred McMahon of the Fraser Institute, Riza Mallarangeng of the Freedom Institute and Dr Ken Schoolland of the Hawaii Pacific University discussed the result of the 2010 Economic Freedom of the World (EFW) report, and launched the Indonesian edition of EFW. As migration is greatly linked to the free trade in services, Dr Wolf-Dieter Zumpfort of FNF, Adolf Waraow of the Ministry of Trade (Indonesia) and Dr Tom Palmer of Atlas discussed the complex issues involved the negotiations about the General Agreement on Trade in Services in global, Indonesian and American perspectives respectively.

The conference concluded with the adoption of a ‘resolution’ after successful two days of presentations, seminars and discussions focused on economic growth in Indonesia and other Asian economies, and especially the issues of migration and poverty alleviation in Asia. The resolution contains policy recommendations and it was submitted to the Indonesian parliament through Bapak Muhammad Jafar Hafsah, Chairman of Democrat Party Fraction, on 11 October 2010 by Rainer Heufers, Resident Representative of FNF, Indonesia office.

5

2010 EFN Asia conference

6

Freedom Academy

Asian Youth Enterprise Forum

Submission of the Resolution

7

Resolution

Movement of people is an undeniable fact. In the globally integrated world of today, characterised by its cross-border communication and trade relations, migration is more important than ever.

Migrants add to economic growth and cultural diversity. Migration leads to creation of wealth – for individuals, for destination countries and for home countries. On the other hand, there is a misperception that only outward movement of people is beneficial to home countries, while inward movement of people is detrimental.

Migrants are also exposed to a variety of risks. The poor and low-skilled are particularly susceptible to exploitation.

Macro-economic effects of migration

Annual remittances make up three times foreign aid and more than half the foreign direct investment.

In general, developing countries have younger population, while developed countries are graying. Movement of people help meet the demand for skills and services in the destination countries.

Source countries fear brain drain and loss of valuable work force which should lead to political and economic reform in the source countries.

• Stakeholders in destination and source countries should communicate the net benefits of migration and rectify misperceptions.

• Countries should adopt market oriented policies, relax work permit rules and regulations in order to attract needed skills

• Respect the right to migrate for everyone, relax or remove restrictions.

Facilitating migration

The freedom to move voluntarily needs to be protected and facilitated. International conventions that protect involuntary migrants should be ratified and enforced. There should be multilateral and bilateral agreements on migration, through GATS and outside it.

• Rules and guidelines, in both destination and source countries, should be simplified and made transparent, without over-regulation.

• Reduction in transaction costs will switch migration from illegal to legal channels. • There should be reciprocal recognition of qualifications and accreditation, with freedom to do business with equal

rights as residents. • Unnecessary labour market restrictions should be abolished because an employment contract is a private one

between an employer and a prospective employee. • Easier access to resident permits with permission for re-entry into both home and destination country. • Governments should not discriminate among migrants on the basis of nationality, class, ethnicity, religion and

gender. • Prior to departure, migrants should have information about host country statutes and practices. • Assistance should be duly provided by home country diplomatic officials. • Recruitment agencies should operate in a free, competitive and transparent environment, with proper disclosure and

accountability.

Safeguarding migrant

The notion that migrants create socio-cultural problems in destination countries is a fallacy. The majority of migrants are peaceful; they move in order to find better living situations. They are not a threat to any destination countries but instead create wealth and add to the cultural diversity of nations.

• Domestic and international migrants should have the right to non-discriminatory access to public services which include civil and legal rights, clearly defined paths to citizenship, and non-discriminatory tax systems

• The principle of the rule of law should apply. • Migrants should have access to information and relevant laws

We believe all recommendations should be universally adopted by all countries. Migrants’ rights should be protected, and the rule of law applied in a non-discriminatory fashion. Finally, there should be supportive mechanisms by both public and private stakeholders to ease facilitation of migration.

Social and Cultural Effects of Domestic and International Migration

9 by Dr Tom Palmer

There are many important and complex issues implicated in this topic, but I’d like to start with some relatively simple ones that should be included in the discussion, but are often ignored. First, is that when people choose to move, they do so for their own reasons. It might help to ask them what those reasons are. Most of the international negotiations and agreements among states ignore that, and assume that it is the purposes of the negotiators or the elites that matter, rather than of the people who made the decisions to move. It’s important to remember that those people, who decided to move in search of higher paying work, or for love or to reunite a family, or to escape persecution because of religion or ethnicity, do so for their own reasons. They do not belong to us and they are not some mindless force of nature. When protectionists and anti-immigration activists speak of regions or countries being flooded with migrants or with imported goods, they should be reminded that what they call a “flood” is in fact merely large numbers of transactions, with willing parties on both sides. There are sellers of goods and buyers of goods – when goods made in China “flood” a country, it is because people in that country chose to buy them, not because a force of nature rained them onto the country. And when economic migrants “flood” a region, it is because individual persons and families made decisions to seek better conditions, and they do so because they expect individual persons, families, and firms in the regions to which they’re moving to be willing to offer them money in exchange for their work. People move in order to benefit themselves and when they offer their goods and services to willing buyers, they benefit others, as well. There are gains from trade, not only in the movement of goods from one party to another, but in the movement of services, including labour services, from one party to another, and that entails often people choosing to move themselves to where their labour is more productive. Second, we often hear wealthy people disparage the desire of poor people for higher wages. They are seduced by “glitz,” dazzled by wealth, and so on. I recently saw a part of a film in which a wealthy lady disparaged the desire of poor women to go from 500 rupees a month to 20,000 rupees – as if a forty-fold increase was of no importance to the ability of another to live a better life. The arrogance was remarkable. I would like to experience a forty-fold increase in my income. Wouldn’t you? I imagine it would be an even more powerful incentive when you consider a change from 500 rupees to 20,000 rupees, or from $US11.25 dollars to US$450.60. That is the difference between illiteracy and sickness for your children, or school books and medicine. Third, people move for a variety of reasons, but common among them is to earn higher wages. What do higher wages mean? Is it just that they are searching for more charitable employers, or more favorable labor laws? No, of course not. The employers in wealthy countries will pay higher wages not because they are charitable and not because the law compels it, but because of the marginal value product of the employee’s work, and that marginal value product is higher when there is more capital available. A subsistence farmer who moves from earning on average $2 a day to earning on average $40 a day is doing so because that person is now producing more wealth.

Fourth, that wealth that is being produced in the country with the higher wages, that is to say, in the more capital wealthy regions or countries, is a net addition to wealth available for consumption, not only by the wage earners, but by others, as well. When immigrants or migratory workers are paid for working on a road, they benefit not only themselves, but they create a road for the use of others. Similarly, for agricultural work, manufacturing work, and so on. The huge movement of people in China over the past thirty years, perhaps the largest movement of human beings in the history of the world, has not “flooded” the coastal regions with excess humanity; it is the result of the decisions of hundreds of millions of people to attempt to raise their wages by increasing their productivity, and it has enriched China and the world in the process. 

 

Fifth, The huge increase of wealth made possible by migrants moving from where their productivity is low to where it is higher has enriched people both in the regions and countries to which they moved, and those from which they moved. Remittances are second only to foreign direct investment in importance as a source of external funding for developing countries. Those remittances finance both consumption in poor countries, as people send money to support their parents and their families, and investment, as people put the money into businesses, much desired housing stock, and much more. Moreover, remittances take many forms beyond flows of money, including tools, clothes, medicines, and much more. Those items are not generally counted in the measurement of remittances, but surely they are of very substantial value. Moreover, a great deal of value is represented by the other items that are sent home but are not easily measured, such as clothing, tools, and medicines. Being able to provide medicine to save the life of your child is of enormous value, although it is not captured in the measurements of remittances. Sixth, the aggregate impact of migration is highly sensitive to the institutional setting, as is the case with human behavior generally. Self-interested behavior under conditions of security of property, the rule of law, and freedom of exchange generate enormous benefits for all, but under conditions of insecurity of property, lawless government, and arbitrary interventionism such behavior destroys wealth, creates social conflict and corruption, and generally impoverishes. Institutions matter. If people migrate legally, they enjoy the protection of the law, and the benefit is quite general, as in normal cases of willing sellers and willing buyers of services, for example. But if they cannot do so legally, they will do so illegally, and they will suffer from a variety of disabilities that can generate bad consequences both for the migrants and for the inhabitants of the migration recipient regions and countries. To live illegally is hard. You live in general fear of the police. You are subject to arbitrary treatment. You cannot enjoy a legal existence. It generates corruption on the part of the authorities, who will look the other way in exchange for money, and arbitrary enforcement of law, that is to say, a reduction in the rule of law. We see that in many countries, where illegal immigrants suffer from lack of access to law, liability to exploitation by employers who may choose not to pay wages on time or at all, and general exclusion from the community of law abiding persons. Illegal Central American immigration to the US has generated many such consequences, not because it is migration, but because it is illegal. And that has generated a debate on how to deal with the real problems caused by the illegality. Instead of entering the US by bus, as used to be the case, many immigrants now cross illegally through the desert, which exposes them to great risk, and leads in addition to harm to the property of landowners along the border, as large numbers of people tramp through their farm land or even through their houses, and that generates resentment from the established local population. Seventh, migration is difficult and made even more so by the restrictions on the right of people to move. For a very long time, Mexican nationals used to move to the US for high paid work, and then move back to Mexico. The so-called “Bracero” program instituted in the 1940s in the US made it possible for Mexicans to seek higher paid work in the US and freely to travel back and forth across the border. The Department of Labor estimated that about 12% decided to settle permanently north of the border. Since the conditions for movement were restricted and it was harder to gain entry for work in the US, a much, much higher percentage of those who do manage to get in decide to stay, simply because if they were to go back to Mexico, it would be harder to return the next time. The so-called “illegal immigration” problem in the US is largely a creature of US policies that have made free travel across the border so much more difficult.

                   

Eighth, the so-called cultural threats posed by migration are vastly overstated and often, in my opinion, represent opportunities more than threats. In most cases, the numbers of people who choose to move are in fact relatively small, compared to the much, much larger numbers who do not. About 12% of inhabitants of OECD member nations are foreign-born, for example. It’s not what you’d think from listening to anti-immigrant political speeches. Moreover, those immigrants are sources of creativity and economic growth. Not only are they producing wealth in excess of what they would have produced in their original regions or countries, but they are innovators. Richard Florida of Carnegie-Mellon University and Gary Gates of the Urban Institute, in a study of north American metropolitan areas, found a very high correlation between economic productivity and high tech innovation and the percentage of inhabitants who were foreign born. In the US people speak of someone having “get up and go,” that is, someone who initiates projects, creates wealth, and innovates. If you want to find places with a lot of “get up and go,” go and look for concentrations of people who “got up and went.” That’s what Florida and Gates found in their study, and I’ve certainly seen it in visits to the Google HQ, the Google Plex in northern California, where during lunch you could see whole tables of people conversing in Russian, Chinese, and other languages. It’s also true of all sorts of commercial enterprises. In the US, Indians – mainly Gujaratis – are very prominent in the hotel and motel business. Walk into a well kept and nice hotel in remote South Dakota and there is a good chance you will smell curry coming from the kitchen of the owners. Koreans run, it seems, over half of the dry cleaning establishments. And on it goes, with one industry after another being revived, advanced, improved by immigrants. Cultures are enriched by influences from abroad; there are no so-called pure cultures anywhere on the planet. All great cultures orrow from other cultures, and then adapt them and make them their own. The histories of music, science, art, literature, and ommerce all show that the most creative are those that are not afraid of foreign influence, but are willing, not merely to copy from thers, but to adapt and reshape and make them their own, to their own cultural benefit. Cultures that refuse that process die.

bco 

  11         

In conclusion, we should listen to the migrants. They want to produce wealth. They want the protection of the law. They want their freedom. We should work to establish the institutions of law and justice that will enable them to enjoy the benefits of the freedom to move, the freedom to produce wealth, and the freedom to enjoy life.

               

 

Dr Tom G. Palmer is a senior fellow at the Cato Institute, and director of Cato University, the Institute's educational arm. Palmer is also the vice president for international programs at the Atlas Economic Research Foundation.

13 QUOTEJUG

“The diversity of mankind is a basic postulate of our knowledge of human beings. But if mankind is diverse and individuated, then how can anyone propose equality as an ideal?...If each individual is unique, how else can he be made ‘equal’ to others than by destroying most of what is human in him and reducing human society to the mindless uniformity of ant heap?”

Murray N. Rothbard

“My definition of a free society is a society where it is safe to be unpopular”

Adlai Stevenson

“Economy does not consist in

saving the coal, but in using the

time while it burns”

Ralph Waldo Emerson

“Protectionism is really just another tax on working families often pay unknowingly”

Daniel Griswold

“A liberty society is dependent upon a culture that accepts difference and inequalities that cannot be resolved”

Wolfgang Gerhardt

“It’s a recession when your neighbor loses his job; it’s a depression when you lose yours”

Harry S Truman

“An economist’s definition of hatred is the willingness to pay a price to inflict harm on others”

Edward Glaeserby

“Those who cannot remember the past are condemned to repeat it”

Milton Friedman

Cartoon drown by Karnchanok Khunmuang

14 by Endang Srihadi

Urbanisation Problems in Jakarta

The urbanisation flows to Jakarta after the Eid Mubarak holiday has become an annual phenomenon. Jakarta is one of those urban main destination cities appealing to people who want to have better lives. Jakarta’s charms have attracted many new migrants. This has made the provincial government of DKI Jakarta to have additional work in order to handle demographic administration problems and to reduce additional new migrants through the Operation of Demographic Administration. According to the 2007 data taken from the Demography and Civil Records Agency of the Provincial Government of DKI Jakarta, there had been a decline in the numbers of new migrants coming into Jakarta. In 2003, there were 204,830 additional people recorded. The number fell to 190,352 people in 2004; 180,767 people in 2005; and to 124,427people in 2007. These operations have been meant to restrain the density of Jakarta. The 750.28 square kilometres of the Jakarta area is occupied by 8.48 millions of people. The number increases to 13 million people during the day, because there are commuters from the surrounding areas (Bogor, Depok, Bekasi, and Tangerang). This fact has made Jakarta denser. The area is the same, but the number of people has increased. According to the 2008 census results, the density level of DKI Jakarta has reached 11,315 people per square kilometres. This number will get worse in the next several years. According to data, the provincial government of DKI Jakarta was once again launching the Operation of Demographic Administration on 23 October 2008. The Operation of Demographic Administration, which has been conducted under the Regional Regulation No. 4/2004 on Citizen Registration and Civil Records, will identify citizens who live in Jakarta. The citizens that have been netted through these operations will be sorted. The citizens who do not have identifications, jobs and homes will directly be sent back to their territories. Meanwhile, the citizens who has identifications, but having such problems as double identifications, expired identifications, and inappropriate address, will be punished with light criminal charges. According to the Regional Regulation No. 4/2004, these regulation violators will be punished to pay 5 million IDR or to stay in prison for three months. The effectiveness of the Operation of Demographic Administration launched several times has drawn some critiques from some parties, especially the human rights activists. The Operation of Demographic Administration seems to be a serious violation to the rights of people to work, to find a better life, to have mobility and to have the rights of living. In addition, the Operation of Demographic Administration will not be able to prohibit the urbanisation flows, especially those that include the rural poor groups. Urbanisation is a reflection of the indication of economic stagnation in villages that is marked by the difficulties in finding job vacancies. The motivation factor and extract are equal to become an important determinant in the urbanisation process. Several researches show that the lowest level of job that migrants do in the cities always have better incomes compared when they still lived in the villages. Therefore, the urbanisation has fully become a rational choice to the villagers in order to get better incomes. Sociologically, the character of the new-comer citizens whose majority is from the informal sector is of the same important as the country’s private sector, which has been considered as the main actor of city development. For example, the contribution of the five-leg traders. The data of the provincial government DKI Jakarta shows that the turnover of the five-leg traders in 2006 had reached 13 billion IDR per year. The total amount of the Regional Income and Expense Budget of DKI Jakarta in 2006 valued at 17.9 billion IDR. Meanwhile, the five-legged traders’ contributions toward the economy of DKI Jakarta have never been well accounted for. The poverty problems in Jakarta are closely related to the national poverty problems. So, it is impossible to forbid the poor to come to Jakarta. Meanwhile, the structural poverty persists at the national level. Therefore, the urgent thing that should be done is to increase the ability of big cities (especially Jakarta) to plan the development pattern to accommodate urbanisations. The unstable growth of the economy occurring in some regions should be pressed by the development of new growth centres. The government should also be keen to give incentives to regions that open new employment. Endang Srihadi is a social researcher at The Indonesia Institute

10 – 13 February 2011, New Delhi, India

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http://mps2011.in

India as Global Power: Practicing Liberal Values at Home and Abroad

India is widely seen as an emerging global superpower — Its economy has proven to be robust during the recent global downturn, the nuclear deal has given a special global status and the US has come to see it as a friend in Asia (though not in the world), the EU desires larger role for it, and people around the world respect it as an ancient civilisation with great cultural and religious diversity, based on non-violence, tolerance, and spirituality. The MPS Asia Regional Meeting 2011 addresses three broad issues on the theme of India’s potential emergence as global power and the practice of liberal values. Though the questions are couched in reference to India, most of the issues have international dimension and relevance.

1. What are the internal challenges India still confronts in realising her dream of a superpower? Though Indian economy has been growing at 7-8% annually, many of her citizens are unable to benefit by this growth and feel left out even more. Significant parts of India are under Naxal influence, several areas are suffering from secessionist movements, and many ethnic and religious conflicts have strong economic dimension. The second generation of economic reforms needs to address this critical issue of inclusive growth. It also requires fundamental changes in the working of the Indian democratic system — it needs to become more inclusive, accountable and transparent. Both economic and political system reforms are necessary for India to fulfill her tryst with destiny.

2. How should India engage regionally and internationally? Despite being the largest economy in the region, India has a long way to go to earn the respect, goodwill and trust of her close neighbours. China’s growth, military power, and international influence require rethinking of the engagement not just on the part of India but also for the global community. The nuclear deal with the US has given a unique standing to India but its evolution needs deeper thinking and better understanding. The challenges of development and democracy in Africa are serious and at the same time offer an opportunity to apply lessons of reforms from Asia and around the world.

3. Would India bring any different approach to the working of the international system and the role of a global power? It is very timely and worthwhile to ask whether India would behave differently from other super powers, would it set a new role model as a super power. Would an ancient civilization with a recent birth as a democratic nation through a non-violent struggle against the British and with high levels of family tradition and spirituality bring a different set of values and exercise of power to the international stage? In the aftermath of the financial crisis, a new shape needs to be given to various fora for international cooperation, the global rules of the game must be re-engineered.