Conferences like the ongoing World Economic Forum in Jakarta have rightly shone the spotlight on the promising prospects of rising emerging markets like Indonesia.
The potential of consistent future growth on the back of rich resources, expanding domestic consumption and commendable resilience in international export markets is correctly pointed out.
Equally areas where there is a lack of competitiveness such as infrastructure woes or higher education inadequacies are also being pointed out.
The BRIC (Brazil-Russia-India-China) countries have been growing impressively for over two decades while South Africa, Turkey, Indonesia and a few others have made a deserving claim to be considered as part of the BRIC plus group since the turn of the century.
Various aspects of their competitiveness are being assessed such as soundness of their banking systems, integration with globalized economies, policy reforms, development of capital markets and others.
However, another vital barometer for economic progress needs to be increasingly debated — the case for ethical competitiveness. This issue is to be examined from two dimensions — internal to the country and external in terms of benchmarking with best practices seen in developed countries.
The internal dimension is best understood by referring to a quotation from former US president, Theodore Roosevelt, presciently made in 1900 “The biggest corporation, like the humblest private citizen, must be held to strict compliance with the will of the people.”
Fortunately, the winds of democracy have been sweeping at various speeds across some key emerging markets and for open societies having access to free flow of information the Roosevelt Test can be applied.
Are corporations in these emerging markets being held to the same standards of compliance as are the hundreds of millions of ordinary citizens?
Are companies able to fix the system, perpetuate oligopolies and unfairly rig outcomes in capitalist models increasingly prone to manipulation and distortion?
There is no doubt about the growing clout of the corporate sector of emerging markets and in some notable instances this is also now increasingly seen as an instrument of economic empowerment for surrounding communities and clusters.
The trends pointing to wider adoption of corporate social responsibility practices, expansion of philanthropic activities and emergence of social entrepreneurs are to be encouraged and socialized further.
However, there is also a growing sense of alienation over the appearance of one set of rules for the corporate sector and another for the populace.
From tax planning to debt restructuring to land acquisition at throwaway prices to industrial accidents to environmental degradation to insider trading to disproportionate access to scarce resources like water to the ability to ride out of scandals with nominal consequences — there are several black sheep in the corporate sector that appear to routinely get away with serious acts of omission and commission.
There are two major reasons for the lack of internal ethical competitiveness. The first relates to the continued complexity, duplication, confusion and obfuscation of rules and regulations.
Misconduct and corruption thrives in the gray zone and one of the areas of serious weakness in the BRIC plus emerging markets is the lack of regulatory clarity.
Urgent steps need to be made to simplify regulations and using the transformative power of IT, make these fully and freely available.
Simplified, commonsense regulations will help eliminate fixers and middlemen. When multiple interpretations are eliminated compliance will be facilitated.
The second relates to improving enforcement capability and consistency. White collar crime is an ugly reality of modern societies and regulators need to be on top of their game in detecting violations and prosecuting with speed and uniformity.
The old excuses of untrained judiciary, inadequate enforcement manpower, underdeveloped systems or outdated laws have no credence in countries that are members of G20 or have aspirations to change the global economic order.
The growing currents of protectionism and misplaced nationalism when it comes to adoption of higher industry standards also need to be guarded against.
While emerging countries justifiably need time to catch up on higher standards relating to wages, anti discrimination, carbon assessments and mitigation or sector sustainability the trend must be towards progressive convergence with internationally acceptable practices.
Lowering the bar by rigidly sticking to laggard local standards is unsustainable as markets open up.
Unnecessary talk of foreign conspiracies and non trade barriers distracts from the need to get one’s own house in order.
If the Indonesian mining, paper and palm oil industries balance resource development with strict controls on the environment then the real beneficiaries are Indonesian citizens not Euro ‘greens’.
Likewise, if garment, shoes and furniture exporters are held accountable for minimum wages, prevention of child labor etc. benefits first accrue to the Indonesian workers rather than to global brands.
External ethical competitiveness has to do with benchmarking of ethical practices with peer country standards.
Thus, as an example the government needs to undertake a serious review of the ethical competitiveness of state oil and gas company Pertamina with peers like Petronas of Malaysia, Petrobras of Brazil, Petro China and Indian Oil.
This should cover key aspects like procurement integrity, financial transparency, independent oversight and environment, health and safety compliance.
Since Indonesian SOEs continue to dominate the corporate landscape robust benchmarking will help them reform and prepare better for the competitive times ahead. Their owners, who are ordinary taxpayers, will welcome efforts aimed at improving performance — financial as well as ethical.
The same applies to the private sector which despite some shining examples also has serious catching up to do.
The pace needs to quicken since scandal weary societies are running out of patience on unchecked ethical compromises.
The columnist is CEO of international strategic advisory firm IndonesiaWISE which is also co-lead on a pioneering emerging markets focused project tracking trends in environment, social and governance in the corporate sector. Insight appears on the second Saturday of each month.
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