Indonesia has the symptoms of a “prismatic society” – explaining the dynamics and administration of developing countries – such as big differences between formal regulations and real practices on the ground. In other words, aside from formal organizations, there are informal ones, or parallel systems, funded by nonbudgetary sources of income, and their very existence is often hidden. We feel this phenomenon, but most people are reluctant to talk about it. There is the problem of low quality within Indonesia’s civil service, including the fact that a merit-based system is still not fully in place. Nepotism and patronage remain deeply intertwined within the civil service culture. There is little good governance, budgeting management is not yet transparent and there’s a lack of community participation. There is also an absence of public accountability or a solid connection with civil society initiatives.

What lessons can be learned?

Knowledge makes the difference between poverty and wealth. And the transition from developing to middle income to wealthy occurs because a new, innovative productivity factor is introduced and, most important, sustained. Knowledge is a base for innovation. For example, Singapore has placed greater emphasis on human resources development, in particular critical thinking, competency building, collaboration skills and character attributes such as mindfulness, curiosity, courage, motivation and resilience. A knowledge-based economy “is an economy in which the production, distribution and use of [applied] knowledge is the main driver of growth, wealth creation and employment across all industries,” according to the Asia-Pacific Economic Cooperation’s economic committee.

How important is knowledge? Forty years ago, Ghana and South Korea had about the same income per capita. By 1990, South Korea’s income was six times higher than Ghana’s. While part of the gap is due to more investment and more workers, half of the reason is attributed to Korea’s greater success in organizing and using knowledge, in particular embracing technology and manufacturing, similar to Germany. And Indonesia has characteristics similar to Ghana, although Indonesia sits much higher on the United Nations Human Development Index.

The World Economic Forum’s Global Competitive Index for 2014-15 shows not much has changed. South Korea ranked 26th, while Indonesia was 34th and Ghana came in at 111.

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