Commitment to reform key to recovery<\/p>\n
JAKARTA (JP): Indonesia's way out from its worst ever economic
\ncrisis does not depend on the substance of the IMF-sponsored
\neconomic reforms but on the seriousness in implementing the
\nprogram, economists have said.<\/p>\n
Because Indonesia has not installed a new political regime,
\nthe recovery process will be incremental and longer than that in
\nother crisis-hit countries, Mari Pangestu, executive director of
\nthe Center for Strategic and International Studies, said Monday.<\/p>\n
\"A change in the political regime is the first best policy to
\nrevive confidence that reforms would be implemented seriously,\"
\nMari told a seminar at the center.<\/p>\n
She pointed out that both Thailand and South Korea formed new
\ngovernments before implementing their reforms and that those
\ncountries had started to regain international confidence in less
\nthan six months.<\/p>\n
Mexico recovered from its crisis earlier this decade in two
\nyears because its new government implemented reforms seriously,
\nshe said.<\/p>\n
\"Expecting a Mexican experience is not an option for
\nIndonesia, because we don't have a new platform,\" she said.<\/p>\n
Indonesia can only expect to recover in three to five years if
\nthe government implements the reforms seriously, she explained.<\/p>\n
\"Commitment in the implementation of reforms is the second
\nbest policy,\" Mari said, adding that positive signs of government
\ncommitment to follow the IMF-sponsored reform would attract
\ncapital inflow, but that negative signals would quickly scare off
\noverseas capital.<\/p>\n
An IMF team has been in Jakarta for almost three weeks
\nreviewing Indonesia's economic reform programs, which are
\nsupported by the Fund's US$43 billion bailout package.<\/p>\n
The review has focussed on monetary issues, banking reform,
\nthe budget and subsidies, structural reforms and private sector
\noverseas debt. The results are expected to be announced today.<\/p>\n
Relations between Indonesia and the IMF became strained when
\nthe country was seen to be backtracking from its commitment to
\nthe sweeping reform program agreed to in January.<\/p>\n
But since the start of the reform review process, the two
\nsides have been voicing positive developments, a major factor in
\nthe strengthening of the rupiah's exchange rate against the U.S.
\ndollar from the 10,000 level to about 8,000.<\/p>\n
The country's economy is reeling, prompted by the sharp plunge
\nin the rupiah which dived to 17,000 to the dollar in January,
\ncompared to Rp 2,450 in pre-crisis July.<\/p>\n
Hadi Soesastro, another economist at the center, said
\ninternational confidence in Indonesia was vital for the country's
\neconomic recovery because foreign confidence would invite
\ndomestic confidence.<\/p>\n
\"The overseas market will be a key factor. If they think it is
\npositive, the domestic market will react positively,\" said Hadi,
\npointing to the government's seriousness in implementing the
\nreform programs.<\/p>\n
He stressed that it was not the reform items that the market
\nwas studying, but the government's commitment to the reforms.<\/p>\n
He suggested that the government provide a list of programs
\nand a timetable for implementing them to establish credibility to
\nthe new reform package.<\/p>\n
Both Mari and Hadi said that the government's credibility
\nwould be continuously evaluated by the market.<\/p>\n
\"We are in an imperfect situation because we didn't provide a
\nnew regime,\" said Mari, explaining the behavior of the market.<\/p>\n
They said that credibility was also critical in solving
\nIndonesia's banking and overseas debt problems.<\/p>\n
Mari said the success of restructuring more than $68 billion
\nin private sector overseas debt would depend on the government's
\ncommitment to the reform programs.<\/p>\n
She added that since fixing Indonesia's ailing banking sector
\nwould need foreign capital, providing positive market signals was
\ncritical to attract capital inflow.<\/p>\n
She, however, said that reviving the banking sector would take
\nyears because of an alarming level of bad debts from dying
\ncorporations.<\/p>\n
To prevent a total collapse in the country's corporate sector,
\nshe urged the government to launch an emergency program,
\nincluding trade financing. (08)<\/p>",
"url": "https:\/\/jawawa.id\/newsitem\/commitment-to-reform-key-to-recovery-1447893297",
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"sponsor": "Okusi Associates",
"sponsor_url": "https:\/\/okusiassociates.com"
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