Against populist programs<\/p>\n
Thirty-four economists from the University of Indonesia
\nexpressed great concern last week over what they saw as the
\nunrealistic economic visions and programs promoted by the five
\npresidential candidates over the past month of campaigning.<\/p>\n
The economists said most of the economic programs put forward
\nby the candidates were short-term populist measures that could
\ndamage the long-term foundation of the economy.<\/p>\n
The last month was indeed a busy time for the five
\npresidential candidates as they roamed the country, jumping from
\none province to another and making many sweet promises to garner
\nvoter support.<\/p>\n
One of the candidates promised to create almost 13 million
\njobs within the next five years. Another candidate promised free
\neducation up to high school for all students and generous
\nsubsidies for small enterprises and farmers. Still another
\ncandidate committed to creating millions of jobs through labor-
\nintensive projects such as the building of low-cost public
\nhousing.<\/p>\n
These promises are obviously unrealistic and almost impossible
\nto deliver given the severe restraints within the state budget.
\nOne may wonder how the candidates could be so ignorant about the
\nsorry state of public sector finances.<\/p>\n
The reality is that almost one-third of total state revenues
\nexpected in the current fiscal year must be allocated to just two
\nexpenditure items: domestic and foreign debt interest payments,
\nand fuel subsidies.<\/p>\n
These items are also the most sensitive to market fluctuations
\nin interest rates, exchange rates and international oil prices,
\nwhich have of late been on a steep upward trend. And yet more
\nworrisome is that these severe budget limitations will persist at
\nleast until 2010, when domestic and foreign debts are cut sharply
\nto as little as 40 percent of gross domestic product through
\namortization.<\/p>\n
The economists warned that there was simply no room for the
\nnext president to distribute political goodies, reminding any new
\ngovernment of the steep challenges that lie ahead.<\/p>\n
They recommended six basic policy frameworks as guideposts for
\neconomic development over the next six to eight years, covering:
\ninvestment promotion, poverty alleviation and a more equitable
\ndistribution of income, a clear blueprint for the development of
\nnatural resources, the enhancement of good governance, and better
\ncoordination between the central government and regional
\nadministrations in making policy.<\/p>\n
The most realistic and effective way of generating jobs is
\nthrough the promotion of private investment, as recommended by
\nthe economists, because it is businesses, whether small, medium
\nor large, that create jobs.<\/p>\n
What is meant by jobs here is not temporary work generated by
\nlabor-intensive projects, but productive jobs in the formal
\nsector where workers receive the full benefits and protection of
\nlabor laws. Job creation is also the most effective means of
\nreducing poverty and enhancing a more equitable distribution of
\nincome.<\/p>\n
Job creation therefore requires a vibrant private sector with
\ncompanies making investments and introducing new technology. But
\nprivate investors, either local or foreign, will only be willing
\nto put up capital if the overall investment atmosphere allows for
\na reasonable calculation of business risks. This requires a
\nhigher pace of reform in such vital areas as taxation, customs,
\nfinancial industry, law enforcement and labor standards.<\/p>\n
Clear-cut blueprints, similar to the Indonesian Banking
\nArchitecture (2004-2014) that was introduced by the central bank
\nearlier this year, are needed to provide long-term direction and
\nto create policy predictability for the development of natural
\nresources-based areas of the economy such as energy, agriculture,
\nmining, turning them into competitive and efficient drivers of
\ngrowth.<\/p>\n
Not all of the policy recommendations by the economists are
\ncompletely new. In fact, most of the recommendations are similar
\nto the reform agenda included in the White Paper released last
\nSeptember. That document outlined, though not in as great as
\ndetail as the economists in their 86-page report, almost all of
\nthe reform measures needed to reinvigorate the investment
\nclimate.<\/p>\n
Given the government's huge debt burdens and the restrictions
\nit faces in increasing tax revenue due to weak economic recovery,
\nthe new government will have no other alternative but to zero in
\non bolstering private investment to drive economic growth, create
\njobs and increase purchasing power for the market of 230 million
\npeople.<\/p>",
"url": "https:\/\/jawawa.id\/newsitem\/against-populist-programs-1447893297",
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"sponsor": "Okusi Associates",
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