Misguided priorities<\/p>\n
It is, we feel, a totally misguided priority for President
\nMegawati Soekarnoputri to leave the capital four days before
\nSunday's summit of the leaders of the Asia Pacific Economic
\nCooperation forum in Shanghai.<\/p>\n
However important her presence may be in Shanghai to introduce
\nherself to other APEC leaders, the President's departure could be
\npostponed until Friday to provide her with more time to manage
\nthe economic crisis, which has now become much more complicated
\nfollowing the wave of anti-American demonstrations.<\/p>\n
By leaving on Wednesday and spending two nights in Hong Kong,
\nMegawati demonstrates not only her virtual ignorance of the real
\nmagnitude of the crisis she is facing, but also a complete lack
\nof awareness that an economic crisis needs emergency treatment
\nand daily monitoring.<\/p>\n
After all, the coming APEC summit will be heavily political in
\nnature, thereby rather irrelevant with regard to Indonesian
\neconomic woes, and likely be dominated by the U.S. agenda to
\nbuild up a stronger global alliance against terrorism.<\/p>\n
Megawati and the government in general should realize that the
\ncontinuing tide of anti-American demonstrations, though
\nrepresenting no more than the actions of an emotionally-charged
\nminority, have created a new kind of uncertainty regarding
\nIndonesia's economic outlook.<\/p>\n
Businesspeople are worried about the danger of an Islamic
\nbacklash at home due to the U.S.-led international fight against
\nalleged terrorist bastions in Afghanistan and how it will affect
\nMegawati's administration. They are nervous and apprehensive that
\nthe anti-American sentiment, if not well-managed, could escalate
\ninto the rising prominence of anti-foreign interests in the
\ncountry.<\/p>\n
Even without the new uncertainty, the weak economy was already
\nhit severely by the far-reaching impacts of the September 11
\nterrorist attacks. Some exporters, faced with dwindling import
\norders from the U.S., have begun laying off employees.<\/p>\n
This uncertainty is certainly inimical to economic
\nactivity, as businesspeople, faced with incalculable risks, are
\nforced to postpone decisions. Consumers with large sums of
\ndisposable income may also be prompted to postpone purchases,
\npreferring to keep their savings in short-term rupiah or dollar
\ndeposits.<\/p>\n
This extreme lack of business and consumer confidence can be
\nseen in the wildly-fluctuating rupiah rate against the American
\ndollar and the persistently depressed condition of the Jakarta
\nstock exchange.<\/p>\n
The perceived condition of insecurity and the weaker economy
\nare especially damaging to the restructuring process of the
\nbanking industry, which could drag more businesses into trouble.
\nThis, in turn, would worsen the financial distress of banks at a
\ntime when many of them are still struggling to achieve the
\nmandated minimum capital adequacy ratio of 8 percent by December.<\/p>\n
The perceived high risks within the economy are also
\ndiscouraging banks from expanding lending operations to the
\nliquidity-starved business sector because of the big dangers of
\nsuffering new bad loans. This adverse condition could put more
\nbanks in danger of failure, with more devastating repercussions
\non the government because almost 90 percent of the banking
\nindustry has been nationalized.<\/p>\n
The new uncertainty is also hindering the process of corporate
\ndebt restructuring, a prerequisite to a sustainable economic
\nrecovery, as debtors have to come up with credible business plans
\nto support their debt-restructuring schemes. But how could one
\nproduce a reliable business plan faced with this uncertainty?<\/p>\n
Likewise, asset recovery by the Indonesian Bank Restructuring
\nAgency (IBRA) is also being frustrated by the uncertainty as
\ninvestors are jittery about acquiring assets in a country
\nperceived to be high risk.<\/p>\n
It is therefore high time for Megawati and her government to
\nreally start leading and governing the nation by focusing their
\nattention on managing the economic crisis that has forced tens of
\nmillions of people into unemployment and absolute poverty, and
\ndeprived millions of children basic health services and primary
\neducation.<\/p>",
"url": "https:\/\/jawawa.id\/newsitem\/misguided-priorities-1447893297",
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"sponsor": "Okusi Associates",
"sponsor_url": "https:\/\/okusiassociates.com"
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