New reform package<\/p>\n
The government, after more than two months of delay, has
\nfinally drawn its new reform agenda for implementation under the
\nInternational Monetary Fund's three-year extended facility to
\nhelp the country cope with its economic crisis.<\/p>\n
The reform package, as stipulated in its seventh letter of
\nintent the government sent to the IMF executive board last week,
\nconstitutes the continuation of measures carried over from the
\nprevious reform agreement plus new items that are planned to be
\ncompleted within the next few months.<\/p>\n
The reform agenda still focuses on the core areas which
\ngreatly influence macroeconomic stability such as financial
\nsector reform, privatization of state companies, asset recovery,
\nfiscal decentralization, legal reform and public-sector
\ngovernance. It also lists quantitative fiscal and monetary
\ntargets that have to be achieved until the next review period
\nlater in the first quarter of next year.<\/p>\n
Some of the specific policy actions included in the new agenda
\nare the divestment of state-owned Bank Tabungan Negara and Bank
\nBNI, strategic sales of Indosat telecommunications company and
\nIndofarma pharmaceutical firm, the resolution of big debtors and
\nthe sharing of losses of emergency liquidity credits between the
\ngovernment and the central bank.<\/p>\n
Also prominent in the reform measures is the revision of the
\nbill on an anti-corruption commission, which will be designed as
\nan important instrument in the struggle against graft in light of
\nbuilding good governance.<\/p>\n
The new reform agreement that is expected to be approved by
\nthe IMF executive board in December as a precondition to the
\ndisbursement of the next tranche of the IMF loan facility,
\nconforms with the new IMF guidelines on conditionality.<\/p>\n
The new guidelines, which were announced in September,
\nemphasizes national ownership of sound economic and financial
\npolicies and adequate administrative capacity of a member
\ncountry. The main principle of this directive is that the member
\ncountry (in this case, Indonesia) has the primary responsibility
\nfor the selection, design and implementation of its reform
\nmeasures. Its main objective is to demonstrate that Indonesia is
\nsufficiently committed to implement the programs consistent with
\nits administrative capacity and the political consensus it can
\ngain.<\/p>\n
The new reform agenda therefore is not as elaborate as the 53-
\npoint letter of intent signed last December because the new
\ndocument focuses on the IMF's core areas of responsibility:
\nRectifying Indonesia's balance of payments problems without
\nresorting to measures that could be destructive of its national
\nprosperity, and to achieve medium-term external viability while
\nenhancing sustainable economic growth.<\/p>\n
Since a reform agreement with the IMF confers a kind of good
\nhousekeeping seal signaling its economic endorsement for
\nIndonesian creditors, it will at least help support the
\ngovernment in its forthcoming negotiations with the international
\ndonor community (Consultative Group on Indonesia) later in
\nJanuary.<\/p>\n
The next annual meeting with the CGI will be much more
\nimportant as the government will have to ask for more soft
\ncredits in the form of program loans to finance its Rp 10.50
\ntrillion (US$1.1 billion) pump-priming package. The additional
\nfiscal stimulus is sorely needed to cope with the devastating
\nimpact of the Oct. 12 Bali bombings.<\/p>\n
One cannot, however, pin too high of expectations on the new
\nagreement with the IMF in so far as the bid to regain foreign
\ninvestor confidence is concerned. A continuing program with the
\nIMF only indicates Indonesia's commitment to execute much needed-
\nreforms to deal with its economic woes.<\/p>\n
Most important to investors, especially to the process of
\nrestoring market confidence is the actual implementation of the
\ncommitment. Unfortunately, Indonesia has lagged behind with
\nregard to many of its reform commitments due in part to the
\ncomplications it is facing in its transition from an
\nauthoritarian government to a democratic one and from a
\ncentralized administration to regional autonomy.<\/p>\n
The core macroeconomic objectives of the reform agenda
\nnonetheless remain achievable provided that the government, with
\nfull support of the House of Representatives, increases the
\nmomentum of its structural measures.<\/p>",
"url": "https:\/\/jawawa.id\/newsitem\/new-reform-package-1447893297",
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"sponsor": "Okusi Associates",
"sponsor_url": "https:\/\/okusiassociates.com"
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