Habibie's economic agenda<\/p>\n
The economic agenda tabled by President B.J. Habibie at the
\ninaugural meeting of his cabinet on Monday should impress the
\nInternational Monetary Fund (IMF) team which arrived here
\nyesterday to review progress on the program of reforms agreed
\nbetween Indonesia and the IMF in exchange for emergency loans.
\nThe importance placed by Habibie on ensuring a sufficient supply
\nof basic commodities is essential if a new wave of social unrest
\nand rioting is to be prevented. He also seems to have realized
\nthat setting the wheels of the economy in motion once again is
\nthe only way to bring this nation back from the brink of economic
\ncollapse.<\/p>\n
The President demonstrated a full awareness of the vital
\nimportance of foreign loans. He rightly conceded that the economy
\ndid not operate in a vacuum and that the success of efforts to
\nattract flows of foreign capital back into the country were
\ntherefore contingent on a quick and painless resolution to the
\npolitical crisis. His rapid movement to release political
\nprisoners and demonstrate his strong commitment to overall
\npolitical reform are clever moves to jump start the process of
\nregaining public confidence. This is essential because the IMF
\nand top U.S. officials have made it crystal clear that no aid to
\nIndonesia will be forthcoming until there is strong evidence that
\npolitical reform is proceeding.<\/p>\n
These early signs are quite encouraging, more so because they
\nhave come from a personality who has thus far been regarded as
\nfiscally profligate and economically naive by domestic and
\ninternational markets alike.<\/p>\n
President Habibie and his cabinet inherited a paralyzed
\neconomy. Before beginning their efforts to stabilize the economy
\nthey should first take steps to ensure that it does not totally
\ncollapse. Thousands of foreign businessmen, professionals and
\ndiplomats (including World Bank and IMF personnel) fled Indonesia
\nin fear of their lives after rioting in North Sumatra, Jakarta
\nand several other provincial cities over the last three weeks.
\nHuge sums of capital accompanied them on their flight.<\/p>\n
Foreign lenders, including the IMF, World Bank and Asian
\nDevelopment Bank (ADB), delayed loans. Industrial plants are in
\ndeep trouble because large numbers of expatriate managerial staff
\nhave left the country. Foreign traders have been refusing to
\naccept Indonesian letters of credit, and the distribution
\nnetworks in several cities have been destroyed. Inflation,
\noriginally projected at about 50 percent this year, could spiral
\nto more than 75 percent, and economic contraction, predicted
\nearly this year at 5 percent, could worsen to more than 10
\npercent.<\/p>\n
Despite the 80 percent collapse in the value of the rupiah
\nsince July last year, companies have been unable to finance
\nexports, a problem which has been worsened by the flight of the
\ncountry's ethnic Chinese community, who took their sizable
\ncapital reserves with them.<\/p>\n
Negotiations that started yesterday with an IMF team headed by
\nAsia Pacific Director Hubert Neiss are yet another crucial step
\ntoward regaining international confidence and attracting back
\nforeign capital.<\/p>\n
A positive assessment of progress on the reform package will
\nnot only lead to a resumption of financial aid from the
\norganization itself, but will also unlock billions of dollars in
\nadditional assistance from the World Bank, ADB and a number of
\nbilateral donors who take their lead on Indonesia from the IMF.<\/p>\n
World Bank loans are badly needed to assist the immediate
\nestablishment of a social-safety net, including labor-intensive
\nprograms to employ the millions of jobless workers. The longer
\nsuch initiatives are delayed, the more serious become the risks
\nof a new wave of social unrest and rioting engulfing the country.
\nSpeedy disbursement of aid from the ADB is no less important
\nbecause it will accelerate restructuring of the country's banking
\nsector.<\/p>\n
Credits from country donors such as Singapore, the United
\nStates, Japan and Australia will help reinvigorate Indonesia's
\nforeign trade, which is currently crippled because of the
\ninternational communities' refusal to accept letters of credit
\nfrom Indonesian banks.<\/p>",
"url": "https:\/\/jawawa.id\/newsitem\/habibies-economic-agenda-1447893297",
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"sponsor": "Okusi Associates",
"sponsor_url": "https:\/\/okusiassociates.com"
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