Less upbeat for 2001<\/p>\n
Booming exports and high, stable oil prices, combined with
\nimproving consumer confidence following the first democratic
\nelection of Indonesian President in over four decades in October,
\n1999, have boosted the economy with a growth rate of at least 4
\npercent this year, compared to zero growth in 1999 and a
\ncontraction of over 14 percent in 1998.<\/p>\n
Theoretically, market confidence resulting from this recovery
\nshould pump up the economy to even greater expansion next year
\nbecause investment would join private consumption and export as
\nthe locomotive of growth.<\/p>\n
Unfortunately, this otherwise natural progression of recovery
\nis not firmly secured as we are entering the new year with a
\ngreat sense of foreboding about the political, social and
\nsecurity situation. The momentum of optimism and market
\nconfidence that emerged early this year has now faded and an air
\nof overwhelming uncertainty has gradually engulfed the nation.<\/p>\n
The upbeat market sentiment early this year has turned bearish
\namid worsening political uncertainty, the breakdown of law in
\nseveral areas, emboldened separatist sentiments in Aceh and Irian
\nJaya and increasingly adversarial relations between President
\nAbdurrahman Wahid and the House of Representatives.<\/p>\n
And if the situation is not murky enough, all these problems
\nare being compounded by great concerns about the possible failure
\nof the implementation of political and fiscal decentralization to
\nprovinces and districts scheduled to start next month.<\/p>\n
Economic growth and robust exports seem to have been
\nirrelevant to the financial and capital markets. The rupiah's
\nexchange rate against the American dollar is now more than 21
\npercent lower than in January. Investors who believed the bullish
\nprojections propagated by most securities analysts early this
\nyear got burned as the Jakarta stock market has lost more than 53
\npercent of its January capitalization. The depressed condition of
\nthe stock market is even more worrisome because it is a truer
\nreflection of the pessimism of domestic investors who now account
\nfor more than 75 percent of transactions.<\/p>\n
Most international investors, who early this year nurtured big
\nhopes that Indonesia would return to a more stable environment,
\nhave virtually written off the country from their map of business
\nopportunities. They don't expect any significant improvement in
\nthe business climate soon because the government continues to
\nbackslide on its commitments to reform measures that are the only
\nway out of the current multi-dimensional crisis.<\/p>\n
The persistent spat between the government and the
\nInternational Monetary Fund, the leader of the international
\nbailout program for Indonesia since November, 1997, as reflected
\nin the delay of its loan disbursement in April and December,
\nobviously does not help improve creditor sentiment toward the
\ncountry.<\/p>\n
Therefore, private consumption and export will likely remain
\nthe main locomotive of economic activities next year as there
\nwill hardly be new investments by either domestic or foreign
\nbusinesses because of the uncertainties. Even existing foreign
\nand domestic enterprises, many of which are still burdened with
\nmountains of debt, will likely find it difficult to raise
\noperating capacity due to the drying up of foreign loans and the
\ninability of most domestic banks to resume lending at significant
\nlevels.<\/p>\n
External factors, so far a boon to the export sector, will not
\nhelp either, due to the economic slow down and widely-expected
\nsoft landing next year by the world's biggest economic
\npowerhouse, the United States, after almost a decade of steady,
\nstrong growth.<\/p>\n
Little wonder, therefore, that most private-sector analysts
\nand businesspeople foresee a slackening pace of economic growth
\nto between 4.2 percent and 4.5 percent next year, lower than the
\nmore bullish government projection of a 5 percent to 6 percent.<\/p>\n
But even this projection could be too optimistic if political
\nand security conditions do not improve.<\/p>\n
As far as the economic sector is concerned, the question is
\nnot what measures should be taken but rather how the government
\ncan accelerate implementation of its reform programs, as already
\nagreed with the IMF.<\/p>\n
The top priority programs that are preconditions for a
\nsustainable, stronger recovery remain the same: faster recovery
\nof distressed assets and corporate debt restructuring by the
\nIndonesian Bank Restructuring Agency and marked improvement in
\nthe credibility of the law enforcement system. Without stronger
\nresolve and consistency in implementing these programs, the
\nrecovery process will remain weak, highly vulnerable to political
\nturbulence.<\/p>\n
Asset recovery or sales not only will pump revenues to the
\nstate budget but also will put the assets in the hands of new,
\nmore bonafide investors. Debt restructuring will release
\nbusinesses from the hostage of its creditors and restore their
\ncreditworthiness to obtain new credit lines. Credible law
\nenforcement will create a strong platform of expectations that
\ncan guide official and corporate behavior into good governance
\npractices.<\/p>",
"url": "https:\/\/jawawa.id\/newsitem\/less-upbeat-for-2001-1447893297",
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"sponsor": "Okusi Associates",
"sponsor_url": "https:\/\/okusiassociates.com"
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