Bank restructuring key to recovery<\/p>\n
Fitri Wulandari, The Jakarta Post, Jakarta<\/p>\n
Restructuring the banking sector, the privatization of state-
\nowned enterprises (SOEs) and legal certainty are three key points
\nneeded to accelerate Indonesia's economic recovery, according to
\na local leading economist.<\/p>\n
M. Chatib Basri, an economist at the University of Indonesia,
\nsaid on Monday that returning banks' intermediary function was
\ncrucial to revive the country's economy.<\/p>\n
\"If banks could start giving new loans to industries, then
\nproduction could run again, boosting economic growth and
\neventually absorbing millions of the unemployed,\" Chatib said in
\nan interview with The Jakarta Post.<\/p>\n
Chatib made the comment in response to a deliberation of a
\nspecial decree on economic recovery at the Annual Session of the
\nPeople's Consultative Assembly.<\/p>\n
In apparent support for the New Indonesia Alliance's (PIB)
\ncriticism of the draft, Chatib said the draft was too general and
\nlacked focus. PIB has repeatedly stated the draft is too general
\nand does not provide clear guidelines on how to end the crisis.<\/p>\n
Indonesian banks are in the process of restructuring to
\nimprove their lending capability. However, banks are still
\nreluctant to provide loans to industries that have not performed
\nwell in the sluggish economy for fear of incurring non-performing
\nloans.<\/p>\n
Non-performing loans have a three-month interest payment
\nperiod. In the wake of the 1998 economic crisis, many industries
\nfailed to pay their debts to banks, which contributed to the
\ncollapse of the banking sector.<\/p>\n
Meanwhile, Rambe Kamarulzaman, the head of the MPR's
\nCommission B whose task is to deliberate the decree, claimed
\nlegislators had focused their attention on unemployment.<\/p>\n
\"All factions agree that unemployment is the core of the
\nproblem because it will affect other areas too,\" he told
\nreporters after a hearing at the commission.<\/p>\n
However, he did not specify how the government should reduce
\nthe number of unemployed.<\/p>\n
Meanwhile, Chatib said the second important key point in the
\ncountry's economic recovery was the privatization of SOEs to
\nincrease productivity.<\/p>\n
\"The idea of privatization is to sell idle state assets to get
\nfresh investment so they can be more productive,\" Chatib said.<\/p>\n
Privatization itself is not a popular policy. The government
\nhas not been able to meet privatization targets as opposition to
\nsell state assets to foreign investors remains strong.<\/p>\n
Of the Rp 6.5 trillion (US$722 million) target expected from
\nthe sale of stakes in 25 state enterprises, the government has
\nonly managed to rake in Rp 2.1 trillion.<\/p>\n
Chatib noted that opposition has sprung up because of
\nmisperceptions about privatization.<\/p>\n
\"Privatization does not aim to tap the state budget but to
\nincrease economic performance by increasing the productivity of
\ncompanies,\" he added.<\/p>\n
Both Rambe and Chatib agreed that another key point that
\nneeded to be stressed in the draft decree was legal certainty to
\nensure firms could run their business.<\/p>",
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