Bold reform, not money, will win confidence<\/p>\n
JAKARTA (JP): Indonesia needs to introduce a bold reform
\npackage to deal with deteriorating international confidence in
\nits economy, analyst Laksamana Sukardi said.<\/p>\n
Laksamana, chief executive officer of ReFORM consulting firm,
\nsaid borrowing more money, either bilaterally or multilaterally,
\nwould not be effective in regaining international confidence.<\/p>\n
\"A financial solution alone would not work. Even if we get
\nUS$50 billion in new loan commitments, the market would still
\nreact negatively,\" Laksamana told The Jakarta Post.<\/p>\n
Any financial aid should be supplemented with a bold reform
\npackage to restore confidence in the economy and in the
\ngovernment's capability to manage the economy, he added.<\/p>\n
\"The quality of the forthcoming reform package, and not the
\namount of financial aid, will determine whether the global market
\nwill vote with its feet or with its money,\" Laksamana said.<\/p>\n
When asked what would be the key elements of such a bold move,
\nLaksamana said: \"Just tell the market that we will scrap the
\nnational car program, abandon the N-2130 jet project, abolish
\nmonopoly practices, improve the transparency of policy making and
\nstrengthen the financial sector.\"<\/p>\n
\"And this must be announced by the President himself, not by
\nhis aides, to put more weight to the move,\" he added.<\/p>\n
Currently, Indonesia is seeking both bilateral and
\nmultilateral financial assistance within an IMF-led package to
\ntackle the crisis. It has already got aid commitments from
\nMalaysia, Singapore, Japan and Australia.<\/p>\n
Nevertheless, the government is still negotiating with
\ninternational institutions led by the International Monetary Fund
\n(IMF) for a financial and reform package.<\/p>\n
\"We should differentiate financial crisis from a crisis of
\nconfidence,\" Laksamana asserted, adding that confidence must be
\nrestored with the reestablishment of the basic norms of
\nconfidence.<\/p>\n
Too much emphasis on new offshore debts, he said, would only
\nworsen the crisis as investors were fully aware that Indonesia
\nwas burdened by a large amount of foreign debts.<\/p>\n
\"It was this huge debt which triggered this crisis in the
\nfirst place. How can you restore confidence by borrowing more
\nmoney?\" Laksamana marveled.<\/p>\n
He pointed out that global investors' confidence in Indonesia
\nwas vital for the revival of Indonesia's economy.<\/p>\n
He contended that Indonesia's high economic growth of past
\nyears was fueled largely by global investment elements like
\nforeign debts, foreign portfolio and direct investment.<\/p>\n
Market discipline<\/p>\n
In addition, Indonesia's economy has become increasingly
\ndependent on the global market.<\/p>\n
\"The global market has become the main constituency of our
\neconomy now. But we often forget that this global market is a
\nwell-organized market, where transparency and a level-playing
\nfield are compulsory,\" Laksamana said.<\/p>\n
Therefore, he said, the government must fulfill global market
\nrequirements of transparency and a level-playing field to restore
\nconfidence in Indonesia's economy.<\/p>\n
He cited the deteriorating quality of economic management as
\none of the main reasons for global investors losing confidence in
\nIndonesia's economy.<\/p>\n
According to him, the deterioration of economic management was
\ncaused by inconsistencies in government policies and confusing
\nstatements from government officials.<\/p>\n
Besides, government officials had displayed no real awareness
\nof the crisis. Before the crisis occurred, for instance, they
\ntolerated the widening current account deficits, swelling foreign
\ndebts and worsening banking problems.<\/p>\n
When the crisis struck, it turned out that the government
\n(central bank) was in the dark about how much the private sector
\nowed to foreign creditors and about the maturity dates of these
\ndebts.<\/p>\n
\"In addition, there is too much powerful vested interest in
\nthe country's economy, as reflected in the monopoly and oligopoly
\nin various sectors, relaxed attitude toward corruption and off-
\nbudget financing,\" added Laksamana, a former managing director of
\nLippo Bank.<\/p>\n
All these factors, combined with the separation of the de jure
\npower from de facto power, lack of transparency, the
\npoliticization of the financial market and inadequate control in
\nthe political system, led to poor economic management.<\/p>\n
\"The policy-making process has increasingly become
\npersonalized instead of being institutionalized,\" he pointed out.<\/p>\n
Consequently, Laksamana added, the global market assessment of
\nthe risks in Indonesia's economy became distorted. It was
\nbecoming more difficult to measure the real cost of investment
\nand to make profit projections. (rid\/vin)<\/p>\n
IMF -- Page 12<\/p>", "url": "https:\/\/jawawa.id\/newsitem\/bold-reform-not-money-will-win-confidence-1447893297", "image": "" }, "sponsor": "Okusi Associates", "sponsor_url": "https:\/\/okusiassociates.com" }