Economy crippled<\/p>\n
Not a single economic measure, however sound it may be, seems
\nto matter anymore as Indonesia descends into near chaos and a
\nnumber of foreign governments contemplate evacuation of their
\ncitizens from the country. President Soeharto's concession
\nyesterday to downwardly revise the price of fuel oils and
\nelectricity, which were increased on May 5 to prevent the state
\nbudget from running into an unmanageable deficit, will do very
\nlittle to lighten the burden on ordinary people. Furthermore, his
\nreiteration that Indonesia will adhere in full to reform measures
\nagreed with the International Monetary Fund will have little or
\nno stabilizing effect on the economy.<\/p>\n
The 58 percent interest rate offered by the central bank on
\npromissory notes (SBIs) has been rendered ineffective as a means
\nof attracting foreign money to strengthen the rupiah. The rupiah
\nhas instead fallen to below Rp 10,000 against the American
\ndollar, well below this year's target rate of Rp 6,000. The
\npunitively high interest rates, which have crippled business, now
\nseem irrelevant to the curing of our economic woes. This is
\nbecause of the prolonged period of turmoil, daily demonstrations,
\nrioting, massive looting, and the rampages in Jakarta and several
\nother provincial cities over the last few days. The trauma
\ninflicted by this breakdown of law and order, the high death
\ntoll, and the huge material losses which have resulted have
\ncompounded the recession.<\/p>\n
The country is moving inexorably towards a black hole as more
\nand more worried entrepreneurs, both Chinese Indonesians and
\nforeign, move their capital out of the country, this despite the
\npainful reform measures which have been introduced. Until
\nstability is restored, no new money will flow in. Even the next
\ninstallment from the second tranche of IMF aid and assistance
\nfrom other multilateral agencies and country donors are now at
\nrisk of further delay.<\/p>\n
The riots are feeding fears on financial markets about the
\ngeneral business climate in Indonesia. This bearish spiral is
\nturning in on itself. Every time the situation worsens, the
\nrupiah falls, causing the price of basic goods to rise, which in
\nturn inflames popular anger and leads to further unrest, and so
\non. Real wages have fallen by more than 50 percent over the past
\nfour months and hyper-inflation is taking hold of the economy.
\nFurthermore, a large number of workers who have not already lost
\ntheir jobs will do so over the next few months. Many will not be
\nable to feed their families. What a vicious circle.<\/p>\n
Indonesian economics ministers have rightly conceded that they
\nare fighting a losing battle on the economic front if social and
\npolitical unrest continues to escalate. Coordinating Minister for
\nEconomic and Financial Affairs Ginandjar Kartasasmita went as far
\nas to say in Tokyo on Wednesday that the government must respond
\nquickly and affirmatively to the student protests.<\/p>\n
Ginandjar did not state so explicitly, but what he really
\nmeant was that the key to economic stability had shifted to the
\npolitical field. Unless the government responds quickly and
\nadequately to demands for overall political reform being made by
\nstudents, intellectuals, professionals and politicians, none of
\nthe IMF economic reforms will be of any consequence whatsoever.<\/p>\n
But response from the political leadership has so far been
\nrather insignificant. What the national leadership has been
\ntrying to do so far is to simply keep what it sees as
\ndestabilizing forces at bay. This is not only exacerbating the
\neconomic crisis and political instability, but is also increasing
\nthe costs of the eventual and inevitable leadership succession,
\nnow seen to be the only way out of the present national crisis.<\/p>",
"url": "https:\/\/jawawa.id\/newsitem\/economy-crippled-1447893297",
"image": ""
},
"sponsor": "Okusi Associates",
"sponsor_url": "https:\/\/okusiassociates.com"
}