A new reality<\/p>\n
With the local currency market still in the doldrums, many
\npeople were obviously looking for comforting words and clues as
\nto future government policy on the issue from President
\nSoeharto's State of the Nation Address on Saturday.<\/p>\n
No one knows for certain where the market is heading now after
\nBank Indonesia floated the rupiah Thursday; and the impact on the
\neconomy from the nearly 20 percent depreciation of the rupiah
\nagainst the dollar these past two weeks is not yet fully known.
\nBut as an indication of things to come, prices of imported
\nconsumer goods have already started rising.<\/p>\n
President Soeharto, as expected, addressed the currency
\nproblem in his speech. He described the fluctuations in the
\nrupiah's exchange rate as a new economic reality, something that
\nthe nation, particularly the business community, should adjust
\nto. Indonesia is increasingly becoming more susceptible to the
\nnegative excesses of an open economy, like the currency contagion
\nthat has hit other Southeast Asian countries these past weeks.<\/p>\n
Soeharto gave little away as to the government's immediate
\nplans, but it was comforting to hear that he sees the volatility
\nas temporary. With the right policy, he said, the rupiah should
\nsettle at a new equilibrium. His optimism was founded on the
\nstrong fundamentals of the Indonesian economy.<\/p>\n
The economic figures, as presented in the speech, looked as
\nhealthy as one could expect. Inflation in the year ending in
\nMarch was running at 5.2 percent, the growth of imports was
\nhalved to 10.4 percent, and there were signs that export growth
\nis rebounding. Indonesia's current account deficit has been
\ngrowing at a slower rate, and the size of the deficit is still
\namong the lowest in the region. The country's foreign exchange
\nreserves are sufficient to finance more than five months of
\nimport needs. Finally, Indonesia's economy grew by 7.98 percent
\nin calendar 1996, an upward revision from the earlier official
\nfigure of 7.82 percent.<\/p>\n
Soeharto tampered his optimism with caution in that
\nIndonesia's overall debt service ratio remains high, propped up
\nmainly by the rapid growth of private sector offshore borrowing.
\nHis message is that the private sector should be more prudent in
\ndeciding to take up new foreign loans.<\/p>\n
It remains to be seen how quickly the nation will adjust to
\nthe new reality. The government has already taken measures to
\nsoften the blow, but whether they are sufficient is something
\nthat only time will tell.<\/p>\n
While there are reasons for optimism given the economy's
\nstrong fundamentals, there can be no room for complacency
\nanymore. We recall that when the currency crisis attacked
\nThailand, the Philippines and later Malaysia, some officials
\nsmugly dismissed the likelihood of Indonesia being affected.
\nEvents since then have proved they were too confident.<\/p>\n
For now, Indonesia may have averted an even bigger crisis,
\nthanks to the strong economic fundamentals. But we cannot take
\nfor granted that they will remain strong forever. This is
\nsomething that Indonesia must continue to work on as it adjusts
\nto the new reality of being an open economy.<\/p>\n
The strongest message this crisis has sent is that as a fully-
\nfledge member of the global economy, Indonesia is subject to the
\nforces that determine the pace of the world's economic growth.
\nThis means that all its economic policies must comply with the
\ninternationally accepted rules of the game, if it is to survive
\nthe fierce competition and reap the benefits of the expanding
\nglobal economy.<\/p>\n
Unfortunately, this is a reality that has yet to fully sink in
\nin this country. The government appears to have slowed the pace
\nof its deregulation and debureaucratization drives. At times, it
\neven gives the impression of caving in to big business by
\nreverting back to its old practices of monopolies and
\nprotectionism. We hope this impression, like the currency crisis,
\nwill not last long.<\/p>",
"url": "https:\/\/jawawa.id\/newsitem\/a-new-reality-1447899208",
"image": ""
},
"sponsor": "Okusi Associates",
"sponsor_url": "https:\/\/okusiassociates.com"
}