Addressing economic, emotional insecurities<\/p>\n
James Castle, Castle Group, Jakarta<\/p>\n
There is no doubt that the Sept. 11 tragedy in the United
\nStates will have a profound effect across the globe. While it is
\ntoo soon to determine the full impact, no country will be left
\nuntouched. Indonesia is already feeling the pain.<\/p>\n
The immediate impact on the world economy, which was sliding
\ninto recession well before the attack, has been severe. Business
\nconditions everywhere are significantly worse than they were
\nprior to the terrorist attack. This is certain to make it even
\nharder for Indonesia, still struggling to recover from the impact
\nof the 1997 Asian financial crisis, to regain its confidence and
\nput its economy back on solid footing.<\/p>\n
A further consequence in Indonesia has been to energize small,
\nbut aggressive, bands of radicals, already hostile to the
\nglobalization process, to threaten dramatic action against
\nAmerica and its allies which have attacked Taliban strongholds in
\nAfghanistan.<\/p>\n
Such groups tend to be specifically hostile to U.S. policies
\nin the Middle East, but clearly are more generally disturbed by
\ngrowing democratization and economic progress around the world,
\nand the diminishing ability of self-appointed religious leaders
\nto dictate to their followers.<\/p>\n
The practical result in Indonesia has been to increase the
\nsense of physical insecurity, which always brings a great
\nfinancial cost. Companies and individuals spend more money making
\ntheir homes and places of work safe, and less money on improving
\ntheir businesses and consuming products that are the lifeblood of
\ndomestic demand.<\/p>\n
Consequently, domestic demand, the key element of the limited
\neconomic growth in Indonesia since 1997, has dropped, further
\nendangering economic recovery prospects.<\/p>\n
On a broader front, investors, both foreign and domestic, have
\nbeen generally hesitant to commit large amounts of money to
\nIndonesian projects because of the political uncertainty of the
\npast several years.<\/p>\n
It is a cruel blow to the country that the security situation
\nshould re-emerge as such a threat, just as the new government of
\nMegawati Soekarnoputri seemed to be bringing some political and
\npolicy certainty to the domestic scene.<\/p>\n
This threat takes both physical and political forms. There is
\nthe physical threat against the life and property of both
\nforeigners and Indonesians working in international companies.
\nThis makes both investors and their employees feel insecure and
\nunwilling to commit new resources to Indonesian companies or
\nprojects. This further weakens the market for domestic companies
\nthat often sell significant amounts of goods and services to
\nforeign investors and their employees.<\/p>\n
Indonesian exporters, already badly hurt by the drop in global
\ndemand, have found that orders from Indonesia are among the first
\nto be canceled because political uncertainty creates a delivery
\nrisk in the minds of buyers.<\/p>\n
Threats to physical security also devastate the tourist
\nindustry, one of Indonesia's major foreign exchange earners.
\nThis, in turn, weakens the currency, which helps fuel inflation.
\nHigher prices then mean that Indonesians buy less, which means
\nthat Indonesian companies sell less, a vicious cycle of economic
\ndecline.<\/p>\n
These blows to exports, tourism and the currency, make the
\nprivatization of state enterprises and the sale of IBRA assets
\neven more crucial to the country's recovery. Because despite the
\ninternational problems, investors remain highly interested in
\nthese assets. And the hard currency payments from these sales
\nwill generate even more cash for the national budget because of
\nthe weaker rupiah.<\/p>\n
On the political front, challenges from \"radical Islam\" can
\nonly weaken the carefully crafted, centrist coalition between
\nsecular reformers and moderate Islamic elements that the Megawati
\ngovernment was able to put together less than three months ago.<\/p>\n
Much of the political capital needed to mollify critics of
\neconomic reform now must be spent dealing with critics of
\ngovernment's close relations with the U.S. Indeed, Indonesia's
\nparticipation in the global economy is being fundamentally
\nchallenged.<\/p>\n
The government is so concerned about the impact of the
\nanticipated global recession that Coordinating Minister for
\nEconomic Affairs, Dorodjatun Kuntjoro-Jakti, has announced his
\nintention to convene a national gathering of academicians and
\nentrepreneurs to prepare its response.<\/p>\n
The government has said it will present the results of studies
\nconducted by multilateral agencies like the World Bank, the
\nInternational Monetary Fund, the Asian Development Bank and other
\ninternational sources as raw material for this meeting.<\/p>\n
As important as these matters are, it is to be hoped that the
\ngovernment will also invite religious and other social leaders to
\nsuch an event. This is necessary so all social groups, not just
\nbusiness people and professionals, will be more aware of the
\ndangerous economic waters into which we have now been forced to
\nventure.<\/p>\n
All segments of Indonesian society should be mobilized to help
\novercome the current domestic crisis.<\/p>\n
The country's unresolved problems caused by 1997 Asian crisis
\n-- huge national debt, bankrupt companies, a moribund banking
\nsystem and a rotting infrastructure -- are bad enough. Wise
\nleadership and open communication are needed to facilitate
\nrecovery and avert further decline.<\/p>\n
Full participation in the global economy and close relations
\nwith the U.S. are the solution, not the problem. The events of
\nSept. 11 and its aftermath should not be allowed to distract the
\ncountry from this basic truth.<\/p>",
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"sponsor": "Okusi Associates",
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