Market will give Cabinet benefit of the doubt<\/p>\n
President Megawati Soekarnoputri's Cabinet is an excellent
\nstart for the new government to work with, Hadi Soesastro, an
\neconomist and executive director of the Centre for Strategic and
\nInternational Studies, told The Jakarta Post.<\/p>\n
Question: How do you see President Megawati's Cabinet.<\/p>\n
Answer: The Cabinet is much better than what had been
\nanticipated by the market. What I am greatly impressed with is
\nher bold move to appoint technocrats (Dorodjatun Kuntjoro-jakti
\nand Boediono), whom she has never worked with, to the most
\nimportant economic portfolios.<\/p>\n
Doesn't that decision lend high credibility to her Cabinet?<\/p>\n
Precisely. That is what I greatly admire about her; putting
\naside her political party interests to form a working team that
\ngains market and political acceptance. Previously, most analysts
\nexpected that only one or two technocrats would be appointed to
\nthe economic portfolios, given the competing political party
\ninterests she had to cope with.<\/p>\n
Don't you have any reservations about the Cabinet?<\/p>\n
Again, I should stress that the market praise of the Cabinet
\nis a good asset to capitalize on. But the Cabinet has to get to
\nwork immediately to prove itself. Megawati has just created a
\ngarden full of beautiful flowering plants, but one still wants to
\nsee whether the plants will be able to bloom in the garden. But
\nI'm quite sure the market will give the Cabinet the benefit of
\nthe doubt.<\/p>\n
Do you think the accommodation of major party members in the
\nCabinet will guarantee full cooperation of the legislature?<\/p>\n
Theoretically, it should. But then we will have to see whether
\nthe political party leaders understand the consequences of their
\nparticipation in the Cabinet.<\/p>\n
The House had intervened too much in the government under
\nAbdurrahman Wahid's leadership. But that was partly because then
\nchief economic minister (Kwik Kian Gie) encouraged the House
\nmembers to meddle with the technical details of policy measures
\nsuch as privatization and asset sales. The then ministers did not
\nwant to be blamed for any possible mistakes that might occur
\nlater.<\/p>\n
What's the Cabinet's top priority regarding the economy.<\/p>\n
Top priority on the economic agenda continues to be fiscal
\nsustainability, including prudent debt management, bank
\nrestructuring and asset recovery.<\/p>\n
But will the Indonesian Bank Restructuring Agency (IBRA) be
\nable to meet its tasks of asset recovery and debt and bank
\nrestructuring.?
\n I think IBRA itself should first undergo total restructuring. I
\ndon't see a high standard of transparency and accountability at
\nthe agency. When established, IBRA claimed to be an organization
\nfull of highly competent professionals, but it has turned out to
\nbe the most backward and non-transparent of institutions. It is
\nunderstandable that IBRA's highly paid staff want to take
\nadvantage of the limited operation period of the agency while
\ntrying their best to avoid any responsibility for any actions
\nthey make.<\/p>\n
What about the role of the central bank, Bank Indonesia?<\/p>\n
Bank Indonesia is expected to act as an anchor to provide
\nconfidence to the market. But this supposedly independent
\ninstitution is also rotten; devoid of accountability. It should
\nhave been dissolved, replaced with a completely new, clean
\ncentral bank just like what was done in the Philippines.<\/p>\n
Is it a good idea?<\/p>\n
Well, this is a matter of organizational culture. IBRA and
\nBank Indonesia were not well prepared to execute their tasks.<\/p>\n
How do you see the privatization program for state-owned
\nenterprises (SOEs)?<\/p>\n
The government has so far focused the privatization program on
\nthe most commercially lucrative among the 160 or so SOEs. This
\napproach is not correct as it zeros in on raising cash instead of
\nan overall reform to make them competitive. Privatization should
\nalso include overall reform of all SOEs, including the small
\nones, to make them highly competitive and attractive to
\ninvestors.<\/p>\n
The government should act firmly on its privatization, not
\nallowing itself to be held hostage by the House. There were
\nseveral cases where the House was able to cancel a privatization
\nproject. This will scare away domestic and foreign investors.<\/p>\n
How do you see the appreciation of the rupiah?<\/p>\n
There are two factors why a currency strengthens; conducive
\nclimate and intervention from the central bank. The intervention
\nwill only work only if it is in line with the expectation. Not
\nall kinds of intervention will work even with an injection of
\nhundreds of millions of dollars to beef up the rupiah rate.<\/p>\n
When Megawati took power (July 23), the climate was in line
\nwith the market expectation, then the central bank boosted the
\nclimate with an intervention of a reported US$150 million.<\/p>\n
I would have done the same if I were the central bank governor
\nbut for different reasons. The bank governor would have
\nintervened to show that the market was very happy with the fall
\nof Abdurrahman Wahid.<\/p>\n
How do you predict the state budget for 2002?<\/p>\n
The current budget envisages a deficit of some Rp 54 trillion.
\nThe government expects to get Rp 20 trillion in foreign loan
\ndisbursements, Rp 27 trillion from asset recovery by IBRA and Rp
\n6.5 trillion from privatization of SOEs. But like most other
\nanalysts, I doubt that the government will be able to achieve the
\ntarget revenues from asset sales and privatization.<\/p>\n
So you see, it will be an uphill task to plan the 2002 state
\nbudget. The government will most likely need a month or so to
\nprepare its budget proposal. A lot of things must be considered,
\nfor instance, the impact of fiscal decentralization which will
\naffect the central government's revenue, the plan to increase
\ncivil servants' wages and how to repay and service domestic and
\nforeign debts. (I. Christianto, Vincent Lingga)<\/p>",
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