A matter of will<\/p>\n
Many people assumed that the economy would automatically
\nrecover as soon as the government of President B.J. Habibie won
\nthe approval of major aid donors for its handling of the economy.
\nIt is now clear they could not have been more wrong. Two weeks
\nsince the government signed the latest letter of intent with the
\nInternational Monetary Fund, the rupiah's exchange rate -- the
\nbarometer measuring people's confidence in the economy -- still
\nhovers between Rp 14,000 and Rp 15,000 to the dollar, with no
\nsign of improving any time soon.<\/p>\n
The President does not seem to have any problem convincing aid
\ndonors to come up with large cash pledges. In the past three
\nweeks, the Asian Development Bank has disbursed $1.5 billion, the
\nWorld Bank $1 billion, Japan has come up with a plan to help
\nfinance Indonesia's export and import activities, and the United
\nStates has started mobilizing food aid for Indonesia. The World
\nBank has also appealed to other donor governments to come up with
\nmore cash at a meeting of the Consultative Group on Indonesia in
\nParis later this month.<\/p>\n
In normal circumstances, such a strong international vote of
\nconfidence from foreign governments and official lending agencies
\nwould have been sufficient to convince private investors, local
\nand foreign, to follow suit. Alas, this is not the case now.
\nInvestors need a lot more convincing from the government than
\nmere pledges of economic reforms given to aid donors. While
\ndonors may base their aid on compassion, investors are motivated
\nby profit. That means some form of basic guarantee of the safety
\nof their investment is needed. Habibie may have met many business
\nleaders, but he has done very little to create a climate
\nconducive for them to invest once again in Indonesia.<\/p>\n
For one, there is the question of the prohibitively high
\ninterest rates that would kill off most investment plans. The
\ngovernment has kept interest rates high as part of its policy to
\ntry to strengthen the rupiah's exchange rate. Initially this was
\nto be a temporary, shock-therapy measure. But with the rupiah
\nremaining stubbornly low, high interest rates are now becoming a
\npermanent feature of the economy at the expense of investments.
\nThe repercussions of this will be felt in the years to come.<\/p>\n
An even bigger deterrent to investors is the uncertainty of
\ndoing business in this country. The wave of protests and riots
\nthat led to the resignation of Soeharto in May undermined
\ninvestors' confidence. But even with Habibie firmly embedded in
\npower and the protests becoming rarer and smaller, and with the
\nmilitary firmly in control, investors are still reluctant to
\nresume their activities in Indonesia. This is because confidence
\nin the new government, and its ability to provide the minimum
\nguarantee for conducting business, is low.<\/p>\n
Habibie may have promised a lot in his meetings with various
\nbusiness leaders, but he has not regained their confidence. The
\nMay riots have left a sour aftertaste among entrepreneurs whose
\nbusinesses were destroyed. How the riots' aftermath is handled
\nreflects the government's ability to uphold the law and to
\nprotect the business community. Foot-dragging in the
\ninvestigation into the riots is not helping the government's
\ncause to win back the confidence of the business people.<\/p>\n
The revival of the private business sector must be made part
\nof any government strategy for an economic recovery. Habibie must
\nappease investors as much as he has convinced foreign aid donors.
\nHe cannot ignore investors, of whatever ethnic background, for
\nthey are the ones who create wealth and jobs in this country.
\nInvestors, as we have seen, are not asking for much. They just
\nwant a greater legal and political certainty. This should not be
\nhard to provide, but it needs political will. This, sadly, is
\nlacking in the present administration.<\/p>",
"url": "https:\/\/jawawa.id\/newsitem\/a-matter-of-will-1447893297",
"image": ""
},
"sponsor": "Okusi Associates",
"sponsor_url": "https:\/\/okusiassociates.com"
}