'Krismon' in slow motion<\/p>\n
By the time our readers read this editorial, the government,
\nfollowing its Tuesday night Cabinet meetings, should have
\nannounced its latest policy package aimed at rescuing the ailing
\nrupiah.<\/p>\n
Given the situation that has evolved over the past several
\nweeks, this package will need to be bold, insightful and nothing
\nshort of a miracle, for it to have an immediate impact upon the
\nsinking currency.<\/p>\n
We are nevertheless hopeful that what ever policy decisions
\nare announced that the package will produce a firm foundation
\ntowards a medium-term recovery.<\/p>\n
Given the gravity of the situation even a weak policy response
\nis better than no policy response.<\/p>\n
The present predicament reminds us very much of the events of
\nmid-1997 that led to krismon -- an Indonesian abbreviation for
\nKrisis Moneter, or monetary crisis -- which resulted in the
\nmeltdown of the Indonesian economy and eventually led to massive
\npolitical upheaval.<\/p>\n
Both situations were permeated with unfavorable external
\nconditions that were beyond the control of domestic forces. In
\n1997, it started with the free fall of the Thai baht; in 2005, it
\nis high oil prices. It was, and is, exacerbated by local
\nconditions and a government that seems impotent to stem the tide
\nof global challenges.<\/p>\n
During the initial phase of krismon, Indonesian policymakers
\nrepeatedly insisted that the fundamentals of the economy were
\nsound. Only after it was too late did we realize the hollowness
\nof their remarks.<\/p>\n
Over the past fortnight government officials have been busy
\nscampering about from one meeting to another, making one
\nannouncement after the other, but with little apparent success in
\nboosting the economic situation. Time will tell if history
\nrepeats itself.<\/p>\n
While the economists may debate technical remedies, what is
\nmost worrying to us are the similarities in the socio-political
\nenvironment of mid-1997 and mid-2005, in particular a growing
\ndistrust in the government's ability to meet economic challenges.<\/p>\n
The difference in nuance was that eight years ago it was
\nfurther fueled by deep-rooted political discontent.<\/p>\n
Irrespective of the external economic conditions, when the
\nrupiah drops 1,000 points in a matter of days to hit a four-year
\nlow, it is obviously a sign of panic.<\/p>\n
Combined with the perceived inability to provide a sustained
\nsupply of staples, such as gasoline and electricity, mediocre
\nwelfare management, the escalating panic could be a harbinger for
\na crisis in the making.<\/p>\n
Though the impact of events in the global economy are
\nunavoidable, the government could have undertaken preventive
\nmeasures to avoid putting Indonesia in such a vulnerable
\nposition.<\/p>\n
When Indonesia completed its presidential elections in late
\n2004 the country was in an elated mood, and this optimism carried
\nthrough into the following year.<\/p>\n
Gradually however, the economic indicators began showing
\nsigns of rumbling discontent brought about by a lack of concrete
\nmeasures to build a sound economy.<\/p>\n
Four months into the year, inflation was rising, exports were
\ngoing down, public consumption was showing signs of stagnating,
\nwhile unemployment went on unabated.<\/p>\n
The rise in gasoline prices at petrol pumps, albeit necessary,
\nwas not accompanied by appropriate welfare programs that would
\nhave alleviated some of the burden on those hardest hit.<\/p>\n
The government had a golden opportunity to inject some
\nconfidence into the economy in mid-August when it unveiled its
\ndraft budget. However, the draft was universally criticized for
\nbeing unrealistic.<\/p>\n
All the while the President Susilo Bambang Yudhoyono has
\ncontinued with the platitudes that have now become rather stale,
\nif not a tad boring. The situation is not helped by the lack of
\nany significant economic achievements that the President can
\npoint to in his first year in power.<\/p>\n
Everything the President has done so far has turned out to be
\na dud. The infrastructure summit was one such undertaking which
\nfailed to give even mildly positive indications that it would
\nusher in significant investment.<\/p>\n
Despite his very presidential public persona, we must remind
\nthe President that leadership is action, not just position. The
\nnation needs clear leadership now, Susilo!<\/p>\n
The implementation of new economic initiatives does not
\nnecessarily have to be audacious, as long as it is thorough with
\nclear timelines and proof of its progress.<\/p>\n
Simple, straight-forward priorities that everyone can focus
\ntheir hopes on.<\/p>\n
A Cabinet shake-up may or may not be necessary to improve
\nmarket confidence, but what must not happen is a reshuffle just
\nfor the sake of appeasing political forces who are exploiting the
\nPresident's weakened bargaining power. Horse-trading for Cabinet
\nseats will satisfy certain political parties, but it won't help
\nthe economy.<\/p>\n
We do not wish to see a repetition of the glum disappointment
\nthat prevailed when Susilo initially unveiled his Cabinet last
\nyear. Controversy can be overcome, as long as the changes are
\nincisive.<\/p>\n
This nation has come too far to again undergo the ordeal of
\n1997\/8. We wary that without leadership and strong policy action,
\nall that's left to be said is \"here we go again\".<\/p>",
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