A bitter medicine<\/p>\n
The next time a Cabinet minister remarks that the plunge of
\nthe rupiah is a mere monetary phenomenon with little consequence
\non the country's real economy, the entire nation ought to pray
\nthat he or she falls so expensively ill so as to be unable to
\nafford the cost of medicine. For that is exactly the condition
\ninto which millions of Indonesia's poor have been condemned
\nfollowing this week's decision by the government to increase the
\nprices of generic drugs by an average of 20 percent.<\/p>\n
The reason given for the increase? The rupiah's exchange rate
\nhas fallen so hard that it becomes prohibitively expensive for
\nthe government to continue the subsidy on drug raw materials,
\nmost of which are imported and therefore denominated in foreign
\ncurrency.<\/p>\n
The nearly 40 percent depreciation of the rupiah during the 18
\nmonths that Abdurrahman has been in office -- from around Rp
\n7,000 to Rp 11,000\/12,000 to the dollar -- has been a big blot in
\nthe Cabinet's economic record. In deterring their critics, the
\nPresident and his economic team have camouflaged this failure by
\npointing out that the real economy, or what they fondly call the
\npeople's economy, continues to make impressive gains.<\/p>\n
They pointed to a 4.8 percent growth of the gross domestic
\nproduct in 2000, which indeed is a major achievement when
\ncompared to the 0 percent growth in 1999 and the 13 percent
\ncontraction in 1998. They also boasted that Indonesia's annual
\nexport revenues reached an all-time record of $60 billion in
\n2000, although no one has ever tried to explain why the national
\ncurrency, which by conventional economic theory should have
\nstrengthened along with booming exports, went south instead.<\/p>\n
As far as the President and his economic ministers were
\nconcerned, the rupiah's fall was nothing more than a monetary
\nphenomenon, and that people's economic activities have continued
\nregardless of what happens in the currency market.<\/p>\n
They are right up to a point. Most parts of the country's
\neconomy are indeed insulated from the vagaries of the currency
\nmarkets. For most people in this country, life continues (can it
\nbe otherwise?) whether the rupiah rises or falls.<\/p>\n
But it is precisely this kind of smug attitude -- dismissing
\nthe serious implications of the rupiah's plunge on the economy
\nand on the lives of ordinary people -- that makes the government
\nsound downright arrogant. Repeated time and again, it strengthens
\nthe belief that the administration suffers from a lack of sense
\nof crisis.<\/p>\n
Instead of trying to resolve the problem and addressing the
\nreal issue about why confidence in the rupiah is weak, the
\nPresident and his economic ministers have tried to talk their way
\nout of the crisis. They have managed with some success to silence
\ntheir critics. But after this week's increase in drug prices,
\nthey would be downright insensitive to the plight of the poor
\npeople if they continue to insist that the rupiah's plunge has
\nlittle impact on the lives of ordinary people.<\/p>\n
The currency crisis, if prolonged, soon ends being a mere
\nmonetary crisis and becomes a real crisis in every sense of the
\nword, affecting the real economy, and, as in the case of the
\nprices of medicine, hurting real people real bad.<\/p>\n
The government had originally allocated funds to subsidize
\ngeneric drugs widely used by the poor people because they are
\ninexpensive. The subsidy comes in the form of covering the
\ndifference in the rupiah's exchange rate for the imported
\nmaterial for generic drugs. Working on the assumption that the
\nrupiah would stabilize at Rp 7,000 to the dollar, the government
\nin January allocated Rp 1,000 for every dollar that manufacturers
\nof generic drugs spent on imported raw materials. But with the
\nrupiah hovering between Rp 10,000 and Rp 12,000 for the past
\nmonth, the burden became too much for the government. As of May
\n15, the government simply eliminated the subsidy.<\/p>\n
We have yet to learn of the full impact of the increase in the
\nprices of generic drugs, but memories of the 1998 monetary crisis
\nare still fresh in our minds. Then, many people found prices of
\nmedicines, the generic as well as non-generic, beyond their
\nreach. Millions of sick people, including children, were left
\nuntreated. It was this, among others, which prompted the
\ngovernment to launch the massive social safety net programs for
\nthe poor, with the help of foreign aid.<\/p>\n
The full story of that human tragedy in the 1998 economic
\ncrisis has yet to be told, and probably never will be because it
\nwas eclipsed by the major political crisis at the time. But it
\nwas a tragedy that could have been avoided if the government then
\nhad managed the economy, including the currency, properly.<\/p>\n
Similarly, the increase in the prices of generic drugs this
\nweek could, and should, have been averted had President
\nAbdurrahman and his economic team properly addressed the problem
\nof the national currency. Instead, as is almost always the case,
\nthe poor people end up taking the bitter medicine of the
\ngovernment's ineptitudeness.<\/p>",
"url": "https:\/\/jawawa.id\/newsitem\/a-bitter-medicine-1447893297",
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"sponsor": "Okusi Associates",
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