Economic recovery needs greater transparency<\/p>\n
By Riyadi<\/p>\n
NUSA DUA, Bali (JP): Continuing trade and investment
\nliberalization, increasing transparency in economic activities
\nand improving macroeconomic foundations would help steer the
\ncountry out of crisis, a senior economic minister has said.<\/p>\n
Coordinating Minister for Economy, Finance and Industry
\nGinandjar Kartasasmita said that a relatively smooth political
\ntransition toward a more democratic system would also determine
\nthe pace of the recovery process.<\/p>\n
Ginandjar noted in a paper for the Australia Indonesia
\nMinisterial Forum meeting here earlier this week that the crisis
\nhas not encouraged Indonesia to close its markets.<\/p>\n
Instead, it has helped expedite the country's trade and
\ninvestment liberalization with the dismantling of various
\nbarriers, Ginandjar said.<\/p>\n
\"Our progress on the elimination of barriers to investment
\nsince the onset of the crisis has created new markets and new
\nopportunities.<\/p>\n
\"These accomplishments should be a real source of optimism
\nabout future opportunities.\"<\/p>\n
Another source of optimism, Ginandjar said, was the increasing
\ntransparency of economic activities. The government had pursued
\nvarious programs and produced a number of pieces of legislation
\nwhich should ensure greater transparency.<\/p>\n
The measures include restructuring of the banking sector, with
\nan amendment to the banking law and the deliberation of the
\ncentral bank bill in the House of Representatives, corporate debt
\nrestructuring with the enactment of the bankruptcy law and the
\ncreation of a level playing field with the passage of the anti-
\ntrust law.<\/p>\n
In the bank restructuring plan, the government is revamping
\nboth state and private commercial banks which have gone rotten
\ndue to the harsh impact of the crisis.<\/p>\n
Following the sweeping effects of the financial crisis, 96
\nbanks have been found insolvent as their cumulative negative net
\nworth reaches some US$40 billion.<\/p>\n
About half of the total banking system loans are non-
\nperforming.<\/p>\n
Many banks, Ginandjar said, offer deposit rates substantially
\nin excess of what they earn from money lent out just to maintain
\nliquidity and meet daily operating expenses.<\/p>\n
\"This is clearly an untenable long-term situation. Dealing
\nquickly and efficiently with our banking system is a top
\npriority,\" Ginandjar said.<\/p>\n
He noted that the government was determined to close insolvent
\nprivate banks so that they would not burden the economy in the
\nfuture.<\/p>\n
Corporate debt<\/p>\n
In terms of restructuring mounting corporate debt, Ginandjar
\nsaid the government had established two modalities to facilitate
\nthis.<\/p>\n
They are the Indonesian Debt Restructuring Agency (INDRA) and
\nthe Jakarta Initiative -- both providing liaison services to
\ndebtors and creditors to settle their differences.<\/p>\n
INDRA has not yet attracted a single client but the Jakarta
\nInitiative has received claims for assistance in 102 debt cases
\nworth US$12.1 billion and Rp 6.9 trillion (US$775 million).<\/p>\n
In addition, the government has also been able to restructure
\n$4.2 billion in sovereign debt with its bilateral creditors
\nthrough the Paris Club.<\/p>\n
The government has moreover established a bankruptcy court to
\nhelp both local and foreign creditors recover loans from
\ntruculent local debtors. Many creditors and litigation experts,
\nhowever, have balked at the way the court is operating and at the
\ndecisions it has handed down.<\/p>\n
Responding to these concerns, Ginandjar promised that the
\ngovernment would help improve the credibility of the commercial
\ncourt by, among other things, increasing the salaries of
\ncommercial court judges.<\/p>\n
What is more important is that the government has a strong
\ncommitment to pursuing greater transparency, not only in the
\nbanking and court system, but also in the whole system of
\neconomic activities.<\/p>\n
\"Greater transparency ... requires the establishment of a
\nclear set of rules and the honest and fair enforcement of those
\nrules,\" Ginandjar said.<\/p>\n
Another heartening economic development which should create
\noptimism about the future of the economy, the minister said, was
\nin the improving macroeconomic indicators.<\/p>\n
He noted that the inflation rate was moderating and was
\nexpected to fall to 17 percent this year, interest rates were
\ndeclining and now leveling out at 37 percent and the rupiah was
\nstabilizing at the 8,000-9,000 level to the U.S. dollar.<\/p>\n
Some sectors of the economy have started to record flat or
\neven positive growth this year after a serious contraction last
\nyear.<\/p>\n
\"It is a major indicator that the worst effects of the crisis
\nare bottoming out,\" he said.<\/p>\n
But Ginandjar warned that any disruption in the political
\nprocesses toward a more democratic system would hamper the
\nrecovery of the economy.<\/p>\n
The most important political events this year would be the
\ngeneral election in June, the presidential election in November
\nand the formation of a new Cabinet by the end of this year.<\/p>\n
\"If the election proceeds peacefully and the results are
\naccepted by most of the people, we can expect the economy to
\nstart to book positive growth in the second quarter of this year.<\/p>\n
\"And if the election produces credible members of the House of
\nRepresentatives, and the elected president is able to form a
\ncredible government, we expect Indonesia to return to the
\npositive growth path by the year 2002.\" (rid)<\/p>",
"url": "https:\/\/jawawa.id\/newsitem\/economic-recovery-needs-greater-transparency-1447893297",
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