Geared up for 1996<\/p>\n
We have just ended 1995 with an impressive economic growth
\nrate, which was estimated to be 7.1 percent by President
\nSoeharto. After three consecutive years of such a respectable
\nperformance, we enter the new year confident of more robust
\ngrowth.<\/p>\n
The turbulence we encountered in the second week of last
\nJanuary, when the central bank was forced to draw on US$500
\nmillion of its foreign reserves holdings to defend the rupiah
\nfrom speculative attacks, is not likely to recur this year. In
\nthe event of another financial debacle like the Mexican peso
\ncrisis in late 1994, which set off attacks on our rupiah,
\nIndonesia has taken the necessary precautions.<\/p>\n
Bank Indonesia (the central bank) has cemented an interlocking
\nset of bilateral repurchase agreements with Australia, Hong Kong,
\nMalaysia, Thailand and Singapore to cope with speculative
\nassaults on the rupiah. Last week, the central bank widened its
\nintervention band for the buying and selling rates of the rupiah
\nagainst the American dollar to cope with the impact of short-term
\ncapital flows. Moreover, our inflation rate last year was kept
\nbelow 8.5 percent. Though the level is still a high single-digit
\nfigure, it has come down significantly from 9.24 percent in 1994.<\/p>\n
Our national rice stocks, buffered by 1.3 million tons of
\nimported rice and a four percent production increase last year,
\nare now well above the safety level. Barring disastrously bad
\nweather conditions, we can expect an even better harvest this
\nyear.<\/p>\n
The monetary authority has taken a series of measures to cool
\ndown our overheating economy. These moves will hopefully be
\nstrengthened by a conservative fiscal policy through the
\n1996\/1997 state budget, which will be proposed to the House of
\nRepresentatives on Thursday. The government is so strong that,
\ndespite in the face of general elections next year, it won't need
\nto provide political goodies, which usually run counter to sound
\nfiscal management. Hence, we expect a moderate state budget
\nexpansion, which, in real terms (adjusted for inflation), will be
\nonly slightly higher than the current one.<\/p>\n
So sound are the fundamentals of our economy and so rosy are
\nmost of the key indicators that the biggest threat to maintaining
\neconomic stability and growth might come from complacency and
\noverconfidence.<\/p>\n
Complacency could divert our attention from the real problems,
\nwhich are still regarded as perceived rather than real dangers,
\nand eventually hurt our economy. Among the most pressing problems
\nare the eroding international competitiveness of our economy
\ncaused by inefficiency, market distortions (monopoly, oligopoly)
\ncostly red tape, corruption, inadequate infrastructures and low-
\nquality human resources.<\/p>\n
Three successive years of healthy economic growth may seduce
\npolicy makers into quiet satisfaction and a feeling that massive
\neconomic and bureaucratic reforms are not necessary since we have
\nbeen doing so well so far.<\/p>\n
Such complacency could cause officials to underestimate
\nPresident Soeharto's year-end instructions (repeated in almost
\nevery year-end address of the past ten years) regarding:
\nbudgetary discipline, the reduction of wasteful spending, the
\nfight against corruption, more efficient and better public
\nservices as well as effective supervision within government
\noffices and state companies.<\/p>\n
Furthermore, the continuous wave of business complaints about
\nred tape, illegal levies and other forms of malfeasance reveal
\nthe smug attitude of a bureaucracy slow to reform its ways of
\ndoing things.<\/p>\n
Government leaders therefore need to work harder to convince
\nthe rank and file of President Soeharto's urgent message. Our
\neconomy is so inextricably linked to the world economy now that
\nany mistake or policy inconsistency at home will undoubtedly be
\npunished by the international market.<\/p>",
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"sponsor": "Okusi Associates",
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