New reform agenda<\/p>\n
The government's new economic-reform agreement with the
\nInternational Monetary Fund will hopefully end the unnecessary
\npublic debates on whether Indonesia should exit or remain under
\nthe extended fund facility of the multilateral agency.<\/p>\n
With all due respect to State Minister for National
\nDevelopment Planning Kwik Kian Gie, highly regarded for his
\nimpeccable integrity, we nonetheless find it mind-boggling to
\nfathom why Kwik broke ranks with the Cabinet and instigated
\npublic debate on such non-issues as that of the IMF role in
\nIndonesia.<\/p>\n
We loved and fully supported Kwik when he renegaded and acted
\nas an iconoclast of such problems as the government's alleged
\npreferential treatment of large corporate debtors and the
\nhandling of numerous other corruption cases. However, bickering
\nin public over a policy decision that has been adopted by the
\nCabinet could give the wrong signal to the market and supply new
\nammunition to those, who are opposed to the reform campaign, to
\ndiscredit the government and stir up political instability.<\/p>\n
As a member of the Cabinet, Kwik should have realized how
\ndevastating would be the impact on market confidence in the
\ncountry, if the government, notorious for its weak leadership,
\ncreaky and corrupt bureaucracy and judicial system, abruptly
\nended its reform accord with the IMF.<\/p>\n
Kwik, who himself has had experiences in negotiating reform
\nagreements with the IMF in his capacity as the chief economic
\nminister in 1999-2000, should know that IMF approval of the
\nreform program confers a kind of good housekeeping seal signaling
\nits economic endorsement for Indonesian creditors, private
\ninvestors and the World Bank to continue dealing with the
\ncountry.<\/p>\n
The IMF, despite its grave errors in the past, remains an
\nopinion leader for the international market regarding Indonesia
\nbecause IMF credibility and competence are still held in much
\nhigher regard than that of the government that is perceived to be
\none of the most corrupt in the world and which has often
\nbacktracked on its reform commitments.<\/p>\n
Without an independent, international overseer of the
\ngovernment reform programs, as the one now outlined by the IMF,
\nvery few foreign creditors would deal with Indonesia since its
\npublic sector's debts alone are already as large as the country's
\ngross domestic product.<\/p>\n
As a seasoned economist it would be foolhardy for Kwik to
\nassert that the IMF loan did not help the government much because
\nits fund could not be used for budget expenditures. He should
\nknow that IMF loans serve only to strengthen the government's
\nforeign reserves and are held by the central bank as a second-
\nline of defense for the rupiah in light of securing market
\nconfidence in the external balance position.<\/p>\n
Lambasting the IMF for what he called its coercion of the
\ngovernment to hastily sell nationalized banks to private
\ninvestors while they still hold huge sums of government bonds
\ndoes not make any sense at all.<\/p>\n
Kwik himself has often criticized Indonesia for being very
\nmuch like a communist country because most of the country's
\neconomic assets are now under government control.<\/p>\n
He is intelligent enough to realize that the longer the banks
\nremain under government ownership the longer would be their
\nrecovery. Only new strategic investors will be able to accelerate
\ntheir restructuring.<\/p>\n
Obviously, the nationalized banks should be sold together with
\nthe government bonds because without these bonds being booked as
\ntheir capital these banks should have been liquidated years ago.<\/p>\n
Kwik, in complaining that foreign investors have not returned
\nto Indonesia despite the reform agreement with the IMF, has
\ntotally missed the point.<\/p>\n
What foreign investors in their right mind would come to
\nIndonesia when its legal framework is still so creaky and
\ncorrupt, its financial system fragile, when regional autonomy is
\ncausing so many complications and uncertainty and many narrow-
\nminded, self-serving politicians are stoking xenophobia in a bid
\nto gain popularity.<\/p>\n
We don't see anything wrong with the measures stipulated in
\nthe reform agreement with the IMF. Last week's accord that
\nconstitutes the second supplement to the 53-point agreement
\n(Letter of Intent) with the IMF that was signed last December
\nstill focuses on the core areas that greatly influence
\nmacroeconomic stability: Financial sector reform, privatization
\nof state companies, asset recovery, fiscal decentralization,
\nlegal reform and public-sector governance.<\/p>\n
All these programs are completely sensible because without
\nsignificant progress in bank restructuring, the sale of state
\ncompanies and the distressed assets currently managed by the
\nIndonesian Bank Restructuring Agency, legal and governance reform
\nas well as law enforcement, the macroeconomic condition will
\nremain fragile and the recovery process will never gain a strong
\nfooting.<\/p>\n
These reform measures should be implemented, with or without
\nthe IMF fund facility, otherwise the economy will never achieve
\nsustainable recovery.<\/p>",
"url": "https:\/\/jawawa.id\/newsitem\/new-reform-agenda-1447893297",
"image": ""
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"sponsor": "Okusi Associates",
"sponsor_url": "https:\/\/okusiassociates.com"
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