IMF-sponsored reforms need not be taken for granted<\/p>\n
By Makmur Keliat<\/p>\n
SURABAYA (JP): The International Monetary Fund (IMF) has been
\nestablished to assist countries facing serious problems in their
\nbalance of payments and current accounts but it is a great
\nmistake to conclude that it can do nothing wrong.<\/p>\n
Economist Marie Pangestu noted in The Jakarta Post's Jan. 22
\nedition that the rupiah's continuous free-fall should not be
\nblamed on the IMF. It has been argued that the IMF funds is the
\nmedicine which the patient, ie. Indonesia, does not want to
\nswallow.<\/p>\n
According to Marie Pangestu, the financial crisis cannot be
\naddressed immediately due to the government's reluctance to
\nseriously implement the IMF's reform programs. This, in turn, has
\nfurther reduced the value of the rupiah against the U.S. dollar.
\nShe suggested, therefore, that it was better to look closer to
\nhome rather than blame the IMF, globalization and speculation.<\/p>\n
The IMF's mission of assisting countries with serious problems
\nin balance of payments and current accounts is not always in line
\nwith its own objective. These two concepts are different from
\neach other.<\/p>\n
While its mission relates to the ethical aspects of its
\nestablishment, its objectives mainly deal with daily pragmatic
\ncompulsion of the need for survival.<\/p>\n
Indeed, all institutions should be able to survive before they
\nachieve their mission. Due to this need for survival, many
\ninstitutions are more attached to their institutional objectives
\nin their working agenda rather than their institutional missions.<\/p>\n
The establishment of a state is a case in point. No one
\ndoubts that a state has been established with a sacred mission to
\nprovide prosperity and security for their citizens. However, it
\nhas also become an undisputed fact that the existence of the
\nstate itself, particularly in developing countries, has become
\npart of the problem. It has frequently been found that the
\nviolation of human rights and rampant corruption in developing
\ncountries has occurred due to the misuse of power by the state.<\/p>\n
The establishment of the Armed Forces is another example. All
\nstates have set up their armed forces with a mission to protect
\ntheir citizens from external threats and enemies. However, in
\nsome developing countries, the armed forces has been commonly
\nmisused to protect the vested interests of ruling groups merely
\nto preserve the status quo.<\/p>\n
The incongruities between an original mission and real
\nbehavior of institutions, therefore, is a common, undeniable
\nfact.<\/p>\n
To gain a greater understanding of how the above examples
\nare relevant in the context of Indonesia and why the IMF
\nprescription need not be taken for granted, the following analogy
\nis good for comparison.<\/p>\n
The presence of hospitals and their medical doctors is of
\ngreat importance for the care and improvement of social health.
\nThis does not necessarily mean, however, that hospitals and their
\ndoctors will be free from misconduct when remedying their ailing
\npatients.<\/p>\n
It has become a public secret in major Indonesian cities that
\nsome hospitals and doctors give improper and unethical advice so
\nthat their patients will be required to return to them time and
\nagain. In this way, doctors are able to take advantage of their
\nposition to get as much money out of their patients as they can.<\/p>\n
Due to these money making motives, there is a possibility that
\nthe medicine prescribed by the doctor is not effective and will
\nnot help a lot. Only knowledgeable patients will notice the
\ndifference and therefore they will choose not to follow their
\ndoctor's advice immediately.<\/p>\n
In highlighting the IMF's policy prescription, the above
\nanalogy needs to be taken into consideration. A kind of tug-of-
\nwar between its institutional objectives and institutional
\nmission is always omnipresent in the IMF's working agenda.<\/p>\n
Though since the very beginning it has cultivated a mission to
\nprovide assistance to its member countries facing financial
\nproblems and promote world liberal economic order, the IMF, as an
\ninstitution, is also confronted with the problem of how to
\nsurvive.<\/p>\n
Since the IMF is not a charity but a lending institution,
\nwhose financial sources are derived from its member countries,
\nmainly developed ones, the money it has lent should be paid back
\nby the debtor countries.<\/p>\n
This can be achieved only if the borrowing countries can
\nassure the repayment of the financial assistance. Otherwise, the
\nIMF itself can become default like the borrowing countries. It is
\nbecause of this inherent contradiction that the IMF's policy
\nprescription in many cases has become difficult for developing
\ncountries. However, this does not mean that Indonesia should turn
\ndown the IMF's financial assistance. What it needs to do is to
\nscrutinize the IMF's economic reform package and to be selective
\nin its implementation.<\/p>\n
It has been well documented that the success of the IMF's
\npolicy package in developing countries, mainly emphasizing the
\nefforts of how to spur impressive economic growth, has been
\nachieved with high social costs. It is sufficient to say that the
\nsuccess story has come along with high inflation, the freezing of
\nlabor wages, the greater role of foreign economic forces in the
\nmanagement of the domestic economy and the great reduction in
\nsocial investment by the state, particularly in education and
\nhealth services.<\/p>\n
In this context, the economic reform package launched by the
\ngovernment on Jan. 22 seems to imply that Indonesia will suffer
\nthe effects of the crisis in years to come. There is no doubt
\nthat in some cases, the package seems to have given a good
\nimpression and should be welcomed. It has abolished the clove
\nmonopoly practice by the Agency for Clove Marketing and Buffer
\nStock (BPPC) and restricted the trading monopoly of the National
\nLogistic Agency (Bulog) to only rice.<\/p>\n
However, it seems necessary to debate why the economic reform
\nhas also allowed foreign industrial and trading companies to sell
\ntheir products in the domestic retail market. As their capital
\nand management are far bigger and better than most domestic
\nenterprises, it is predicted that foreign enterprises will
\nbenefit from the economic reform.<\/p>\n
In addition, the economic reform package does not touch on the
\ncrucial issue of how to increase labor wages, while the price of
\nbasic commodities continue to rise. It is most likely that labor
\nwages in Indonesia are now the cheapest in Asia in terms of the
\nU.S. dollar as a result of the drastic depreciation.<\/p>\n
Criticism against the IMF's reform policy should therefore not
\nbe regarded as a far-fetched and baseless argument. Otherwise,
\nsome may say that Indonesian economic policy makers, including
\nits technocrats, have behaved like comparadors, the extended arm
\nof foreign economic interests, as has happened in some Latin
\nAmerican countries. Therefore, the criticism, should be
\nencouraged, unless we really want to put all of our eggs into one
\nbasket. Finally, no body is perfect. Therefore, it goes without
\nsaying that no institution is perfect, including the IMF.<\/p>\n
The writer is a teacher at the Department of International
\nRelations, School of Social and Political Sciences, Airlangga
\nUniversity, Surabaya.<\/p>",
"url": "https:\/\/jawawa.id\/newsitem\/imf-sponsored-reforms-need-not-be-taken-for-granted-1447893297",
"image": ""
},
"sponsor": "Okusi Associates",
"sponsor_url": "https:\/\/okusiassociates.com"
}