Backsliding on reforms 'could cause depression'<\/p>\n
JAKARTA (JP): Indonesia's most senior economist Sumitro
\nDjojohadikusumo has warned that the country may plunge into a
\nprolonged depression if economic and political reforms are not
\nimplemented firmly and consistently.<\/p>\n
"What we are now facing is not simply a monetary or merely an
\neconomic crisis, but the outbreak of the cumulative pain from a
\nseries of institutional diseases in our almost entire body
\npolitic," Sumitro told the media over the weekend.<\/p>\n
The monetary crisis was only the symptom of these
\ninstitutional diseases which had been ignored for many years, he
\nsaid, adding that "we only need to take an aspirin to cure the
\nmonetary upheaval. But we should take antibiotics to cure the
\ninstitutional diseases."<\/p>\n
Sumitro said the country had no other alternative but to carry
\nout broad economic reforms firmly, consistently and decisively
\nwhile enhancing good governance through greater transparency,
\nlegal certainty and effective social control.<\/p>\n
He expressed optimism that Indonesia's economy could fully
\nrecover after two or three years provided the necessary reforms,
\nderegulation and structural adjustments were firmly implemented.<\/p>\n
"But if we waver in our reform commitment, the economic
\nrecession may turn into a depression from which it would take a
\nlong, painful period of time to recover. Perhaps six to seven
\nyears," cautioned the economist.<\/p>\n
Sumitro invited a selected number of journalists to a breaking
\nof the fast gathering Saturday because he said he wanted to raise
\nhis concerns over what he saw as backsliding and inconsistency in
\nthe implementation of reform measures, notably those in the real
\nsectors.<\/p>\n
He regretted that a number of officials and businesspeople
\nmisperceived the current crisis for which they layed the blame
\nalmost entirely on economic and monetary technocrats.<\/p>\n
"This misleads the public from the actual problem, which I
\nthink has escalated to a crisis of confidence on the entire body
\npolitic."<\/p>\n
Sumitro said he fully shared the views of economist and former
\nminister Mohamad Sadli in The Jakarta Post Friday that the
\npresent government should immediately be replaced.<\/p>\n
"I share Sadli's views with a precondition that the ministers
\nshould have full autonomy, authority and independence to
\nimplement reform measures fairly and consistently," he told the
\ngathering which was also attended by Sadli.<\/p>\n
Sumitro said that the replacement of the cabinet should not
\nwait until after the meeting of the People Consultative's
\nAssembly in March which would, among other things, elect the new
\npresident and vice president.<\/p>\n
However, Sumitro stopped short of explicitly commenting on the
\nneed for a new president as Sadli outrightly stated in his
\nremarks to the Post.<\/p>\n
He blamed the crisis of public confidence in the government on
\na series of institutional diseases, such as extensive corruption,
\nlegal uncertainty, collusion between officials and
\nbusinesspeople, a weak judicial system and monopolies.<\/p>\n
"There has long been a wide gap and dichotomy between
\nmacroeconomic policies, which are by and large adequate and
\nappropriate, and microeconomic policies which are full of
\ndistortions and inconsistencies and marred by corruption and
\nexcessive protectionism.<\/p>\n
"I have repeatedly warned since many years ago that this gap
\nwould sooner or later cause a short-circuit between those who
\ngovern and the ones being governed. This is what is happening
\nnow," he said.<\/p>\n
He said he anticipated strong resistance from groups with
\nvested interests to the implementation of reforms.<\/p>\n
Sumitro said these vested interest groups consisted of an
\nunholy alliance of crony capitalists who prospered from special
\ngovernment facilities, political connections and collusive
\npractices, a group of people who felt not rooted in the
\nIndonesian soil and officials and businesspeople who had their
\nown political agenda.<\/p>\n
"But we don't have another choice. If we want to get out of
\nthis crisis we must act immediately and firmly to attack these
\ninstitutional diseases in a more focused manner," he added.<\/p>\n
The main objective, he said, was to regain the confidence of
\ndomestic and foreign investors which was a prerequisite to
\nrestoring economic stability.<\/p>\n
For example, he said, clove and citrus fruit monopolies should
\nimmediately be abolished and all non-tax revenues should be
\naccounted for in the state budget.<\/p>\n
He added that reforestation funds should be used for forest
\ndevelopment and not for other purposes, while weak and small
\nbanks should be forced to merge.<\/p>\n
Sumitro conceded that Indonesians would have to endure more
\neconomic pain as a result of the reform measures. But this
\npainful period would be much shorter and less devastating than if
\nthe measures were postponed or half-heartedly implemented.<\/p>\n
Therefore, he said, the tight monetary policy should not be
\nenforced indiscriminately on all sectors. More liquidity should
\nbe injected to small businesses and labor-intensive projects to
\nhelp laborers. This could serve as a social safety net for poor
\npeople.<\/p>\n
He predicted that economic growth would decline from an
\nestimated 4 percent to 5 percent last year to 2-3 percent this
\nyear and inflation would increase to a range of 12 percent to 14
\npercent. (vin)<\/p>",
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