Faulting the economic record<\/p>\n
Most analysts and factions at the People's Consultative
\nAssembly (MPR) criticized President Abdurrahman Wahid for his
\nunsatisfactory record in the economic field and complained that
\nhis progress report on Monday was completely devoid of any
\nstrategic goals, let alone a viable economic vision.<\/p>\n
Even though the economy has started to pick up slowly since
\nearly this year, growing 3.2 percent in the first quarter and
\n4.13 percent in the second quarter from the corresponding period
\nlast year, the nascent recovery is seen as quite fragile. It will
\nnot be sustainable for long without the new investment activities
\nthat remain depressed due to political uncertainty and extreme
\nlack of law enforcement and security.<\/p>\n
Enthusiasm about the budding recovery was further dampened by
\nthe steep depreciation of the rupiah since May, weakening from Rp
\n7,400 to the U.S. dollar in January to around Rp 8,700 at
\npresent, thereby creating stronger inflationary pressure and
\nforcing the central bank to raise its benchmark interest rate
\nfrom as low as 11 percent in February to more than 13.50 percent.<\/p>\n
Even though the economic achievements are still way below what
\npeople expected, given the strong legitimacy of his government,
\nit is really not fair to simply reject Abdurrahman's progress
\nreport to the Assembly as wholly devoid of strategic goals to
\nbring the nation out of its current economic predicament. Though
\nan economic vision was not clearly outlined in his report, one
\ncan infer clear strategic objectives, which form his vision on
\nhow to lead the economy to a sustainable robust growth.<\/p>\n
Most importantly, the President reaffirmed his strong
\ncommitment to macroeconomic stability, continuation of structural
\nefforts, the market economy as well as autonomy of the central
\nbank.<\/p>\n
He demonstrated a full grasp of the fundamental weaknesses
\nbesetting the economy by selecting four pillars to underpin
\nsustainable and just economic growth in the future: macroeconomic
\nstability; strengthening of economic institutions; improvement of
\nstructural policies; and the empowerment of the poor.<\/p>\n
It was obviously impossible for the President to provide in
\nhis report all the details on what the government would do as he
\nhad to cover all the sectors in the 35-page speech. But then one
\ncannot obtain the right and full perspective on his policies and
\nachievements by perusing only his address. The progress report
\nshould be analyzed along with the memorandum of economic and
\nfinancial policies attached to the government's letter of intent
\nto the International Monetary Fund dated July 31.<\/p>\n
The 23-page memorandum stipulates in detail programs and
\nstrategic objectives until 2002 in the four pillars of economic
\ndevelopment cited in the President's progress report. It
\nelaborates efforts to maintain macroeconomic stability through
\nprudent fiscal and monetary management. Its fiscal policies, for
\nexample, clearly address the budget deficit and fiscal
\ndecentralization, and clearly set targets with time tables.<\/p>\n
The President is fully right in citing weak institutions as
\none of the fundamental weaknesses that caused the current
\nmultidimensional crisis. Empirical studies in many countries have
\nclearly concluded that the quality of institutions also affects
\neconomic growth as the institutional framework influences the
\ncost of transactions and transformation (production process).<\/p>\n
The memorandum elaborates on programs to strengthen
\ninstitutions through corporate and banking restructuring and the
\nenhancement of good governance in the private and public sectors.
\nAlso integral in these programs are the audits of major state
\ncompanies with strategic roles in the economy as those operating
\nin utility and upstream industries. No less than 62 state
\nenterprises have been identified to be independently audited by
\n2001 in view of diagnosing their problems and devising efforts to
\nstrengthen their operations.<\/p>\n
All these programs, though appearing separate and unrelated to
\neach other, have the same strategic objective of building up
\nstrong economic institutions in the private and public sectors,
\nwhich are crucial for sustainable growth.<\/p>\n
But again all these programs and their target timetables are
\nstated policies that have yet to be executed. Hence, the upcoming
\nCabinet reshuffle, which will predictably cover mostly economic
\nportfolios, should bring in a strong economic team. The market
\nwill continue to punish the nation's economy if the new economic
\nteam does not consist of highly credible and competent
\npersonalities.<\/p>",
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