Accelerating recovery<\/p>\n
Despite the tumultuous debate about the proposed amendments to
\nthe Constitution that are the main focus of the People's
\nConsultative Assembly (MPR) Annual Session, it is a relief to
\nknow it has still spent some time reviewing economic issues.<\/p>\n
Newspaper headlines and TV reports that have described the
\nsuffering of hundreds of thousands of Indonesian workers during
\ntheir flight from Malaysia in the last two weeks seems to have
\njolted the political leaders into realizing just how bad our
\neconomic condition is.<\/p>\n
The Assembly members should now realize that living conditions
\nin many provinces have been so miserable that it has forced
\nhundreds of thousands of rural people to leave the safety and
\nhospitality of their community and travel to a foreign land to
\nseek work. These people were willing to brave adverse, and often
\nexploitative, living and working environments, to make ends meet.<\/p>\n
It was this painful realization that has apparently prompted
\nthe Assembly to draft a strong recommendation that the government
\naccelerate the economic recovery.<\/p>\n
The recommendation should not, however, overlap with the 2003
\nAnnual Development Plan which the government and the Budget
\nCommittee of the House of Representatives adopted in June as
\npolicy directives for the 2003 State Budget as the third-stage
\nimplementation of the Law on 2000-2004 National Development
\nProgram.<\/p>\n
The Assembly should instead focus its recommendations on the
\nmost strategic and influential factors to speed up the pace of
\nrecovery, such as structural reforms which urgently require
\nfaster implementation to stimulate higher economic growth.<\/p>\n
More robust economic growth, higher than the 3.5 percent
\nestimated for this year, is needed to create jobs for the huge
\nnumbers of unemployed and under-employed people.<\/p>\n
Private-sector analysts and government analysts agree that
\nannual growth of at least 6 percent is required just to absorb
\nthe 2.5 million new job seekers entering the workforce annually,
\nnot to mention the millions left unemployed by the impact of the
\n1997 economic crisis which is now in its fifth year.<\/p>\n
But economic growth cannot be generated by decree, nor by
\nrecommendations. It can only be created by investment and
\nconsumption by the government and the private sector.<\/p>\n
Investment and consumption cannot increase without a quicker
\nprocess to recover distressed assets, to restructure the many
\nbillions of dollars of corporate debts currently managed by the
\nIndonesian Bank Restructuring Agency and to reform hundreds of
\nstate companies.<\/p>\n
These assets are business units that determine the speed of
\neconomic recovery because they are the generators of jobs, the
\nsource of tax revenues and the producers of goods for domestic
\nconsumption and exports.<\/p>\n
Moreover, the banking industry that provides fuel for economic
\nactivities will never regain a stronger footing if most business
\nenterprises remain as unqualified for credit financing as they
\nare now because they are still shackled by bad debts.<\/p>\n
But efforts to fuel a stronger recovery cannot be done by the
\ngovernment alone. The economy, which had been severely damaged
\nfor decades by the corruption and misguided policies of vested
\ninterests, needs better rules of the market game from the
\nlegislative branch. Economic players require law certainty
\nthrough vigorous law enforcement which is the responsibility of
\nthe judicial branch.<\/p>\n
Put another way, sound macroeconomic conditions, which is the
\nprerequisite to a stronger economic recovery, will never occur
\nwithout effective laws and stronger law enforcement. Strong law
\nenforcement is in turn a precondition to good governance, which
\nis the key requirement to attract new investments and gain the
\nsupport of creditors for debt-rescheduling.<\/p>\n
It would, however, be entirely misguided for the Assembly to
\ndemand the termination of the International Monetary Fund's (IMF)
\nrole in the country ahead of its scheduled expiry in December,
\n2003. Such a recommendation would send the wrong signal to the
\ninternational market.<\/p>\n
Witness the new wave of crisis currently engulfing the economy
\nin Brazil. Market confidence in that country suddenly plunged due
\nto the high probability that left-wing presidential candidates,
\nwho are openly hostile to foreign creditors and the IMF, would
\nwin October's elections.<\/p>\n
It is worth recalling that our economic crisis was set off
\nnot by any deterioration in our underlying economic assets but by
\ndomestic and foreign investors and creditors who entirely lost
\nfaith in the government and moved their liquid assets overseas.<\/p>\n
It was the government in the first place that invited the IMF
\nin 1997 to help restore market confidence in the economy and put
\nin place a credible crisis management system.<\/p>\n
The question now is whether the government has regained market
\nfaith to manage the economy without the benefit of an
\ninternational endorsement from such a multilateral institution as
\nthe IMF? The answer is a big No, as can be seen from the
\ncreditors' insistence that any deal with Indonesia would be
\npossible only if the country remains under the IMF extended
\nfacility.<\/p>",
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"sponsor": "Okusi Associates",
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