CGI aid 'not enough to revive economy'<\/p>\n
JAKARTA (JP): The government has welcomed a new US$7.9 billion
\naid package pledged by donors as a sign that the international
\ncommunity trusts its ability to mend the country's wrecked
\neconomy.<\/p>\n
President B.J. Habibie described the huge loans committed by
\nthe Consultative Group on Indonesia (CGI) as an international
\nvote of confidence in his 70-day old presidency and government.<\/p>\n
But private analysts challenged Habibie's claim and warned
\nthat without domestic confidence the huge foreign loans would not
\nhave a positive impact on Indonesia's wrecked economy.<\/p>\n
Habibie said he was surprised by the amount pledged and
\nclaimed that he expected a smaller sum to be granted.<\/p>\n
"We are grateful that within 70 days of me ascending to take
\ncontrol... I received a telephone and fax from Paris indicating
\nthat confidence has been fully restored," Habibie said yesterday.<\/p>\n
But noted economist Anwar Nasution, dean of the University of
\nIndonesia School of Economics, told Antara that donors had agreed
\nto provide Indonesia with more aid not because of the
\ngovernment's performance but because of their sympathy for the
\ncountry's suffering population.<\/p>\n
He said donors were afraid that if a large number of
\nIndonesians fell into poverty then the country could become a
\nregional security menace.<\/p>\n
Anwar also warned the government that the new loans would do
\nlittle to help lift the economy out of the abyss, regardless of
\ntheir size, without it taking complementary measures on the home
\nfront.<\/p>\n
Only improvements to the business and investment climate would
\nhelp expedite Indonesia's economic recovery because that would
\nencourage private funds to reenter the country, he argued.<\/p>\n
The head of research at Vicker Ballas Tamara, Noraya Soewarno,
\nsaid the huge aid commitment was good news but would not
\nimmediately restore foreign investors' confidence in the
\ncountry's battered economy.<\/p>\n
"Economic recovery is still a long way off because there are
\nso many wounds to heal," she told The Jakarta Post, citing the
\nhigh inflation rate, soaring unemployment and escalating prices.<\/p>\n
Economist I Nyoman Moena agreed and said the huge loans would
\nnot prompt an economic recovery but would only "reduce the pain."<\/p>\n
He said the government must exercise financial restraint and
\ndiscipline, especially in its use of the loans, because it has on
\noccasion shown a propensity to deviate from planned budgets by
\nexpanding subsidies. He pointed out that this lack of budgetary
\ndiscipline had forced the IMF and the government to revise the
\nstate budget on a number of occasions.<\/p>\n
Moena, a former Bank Indonesia director, called on the central
\nbank to resist outside influence and work hard to control
\ngovernment spending.<\/p>\n
Monitor<\/p>\n
Didik J. Rachbini from the Institute for Development of
\nEconomics and Finance, called on the public to monitor the use of
\nforeign loans and other public funds because the government was
\nnot accustomed to working transparently.<\/p>\n
"It is difficult to expect the government to work
\ntransparently, especially when dealing with these huge funds.
\nThey would prefer to work within a closed system which would
\nallow their officials to embezzle public funds in peace," he
\nsaid.<\/p>\n
Faisal Basri, another University of Indonesia economist, added
\nthat the government should welcome public monitoring of the use
\nof foreign loans and other public funds.<\/p>\n
He suggested the government adopt a service charter like that
\nin Australia, which allows the public to scrutinize officials'
\nwealth and all government spending.<\/p>\n
Legislators Indra Bambang Utoyo and Djusril Djusan said that
\nalthough the government had secured huge new loans, it must still
\ndo its best to reduce "unnecessary subsidies" which only benefit
\ncertain group of people. They did not specify which subsidies
\nthey were referring to.<\/p>\n
Businessman Benny Soetrisno, vice chairman of the Indonesian
\nTextile Association, suggested that the government use the funds
\nto revive labor-intensive, natural resource-based or export-
\noriented industries.<\/p>\n
Trimegah Securities' head of research David Chang said the
\nmarket expected donor countries grouped in the CGI to push
\nHabibie's government to endorse better policies which would
\neventually restore investor confidence in the country.<\/p>\n
Chang told the Post that the new CGI aid would help the
\nbeleaguered rupiah, which has dropped by around 80 percent in
\nvalue against the U.S. dollar since July last year.<\/p>\n
However, Anwar Nasution disagreed and said the new funds would
\nnot boost the rupiah because although the currency's value was
\npartially determined by the supply of dollars it was more heavily
\ninfluenced by the loss of domestic confidence in the government.<\/p>\n
He said for as long as the government was unable to "tame"
\nopposition forces the rupiah would remain weak. Adding that
\nunfortunately government officials still shunned meeting
\nopposition figureheads. (prb\/aly\/rid)<\/p>",
"url": "https:\/\/jawawa.id\/newsitem\/cgi-aid-not-enough-to-revive-economy-1447893297",
"image": ""
},
"sponsor": "Okusi Associates",
"sponsor_url": "https:\/\/okusiassociates.com"
}