Policy stability<\/p>\n
The chief economist at the New York-based Salomon Brothers
\nInc. securities company, John P. Lipsky, tried last week to
\naddress the jitters, notably among foreign investors, over the
\nlikely impact of next year's election for House of
\nRepresentatives and the presidential election in March 1998 on
\nIndonesia's economic policies. Lipsky, as expected, did not touch
\nupon the highly delicate and tricky issue of any change in the
\nnational leadership (president).<\/p>\n
However, Lipsky's message at a seminar in Jakarta on Friday
\ndoes make a lot of sense and is highly logical. He explained why
\nbusinessmen should not worry too much about the results of next
\nyear's election. He hinted at the great dangers of a reverse in
\nthe current process of economic and bureaucratic reform, thereby
\nimplicitly warning whoever takes over the government in March,
\n1998 to maintain the current policy stability.<\/p>\n
The massive economic and bureaucratic reform process which was
\nstarted in 1985 has steadily increased Indonesia's links with the
\nglobal economy, especially as a result of the export-led strategy
\npursued to bolster national economic development. The intensive
\nties consequently make the economy highly vulnerable to
\ndevelopments in the international economy.<\/p>\n
The vulnerability to external factors makes policy consistency
\neven more imperative, especially now that Indonesia's external
\nbalance is under strong pressures with the current account of its
\nbalance of payments reaching as high as four percent of the gross
\ndomestic product, much larger than the government's target of 2.5
\npercent. The large current account deficit can be managed only if
\nforeign capital continues to flow in either through direct or
\nportfolio investments.<\/p>\n
Further down the line, foreign capital will keep flowing in if
\nforeign investors believe in the prospects of Indonesia's economy
\nand such confidence can be gained only if the government is
\nconsistent in its policies-- particularly of deregulation and
\nbureaucratic reform.<\/p>\n
Therefore, whoever takes over the government after the 1997
\ngeneral election will have no other choice but continuing and
\ndeepening the process of economic and bureaucratic reform. If the
\nnext administration reverses the present policy direction, not
\nonly foreign but also domestic investors would relocate their
\ncapital elsewhere. Such capital flight would adversely affect the
\neconomy and would consequently leave the administration in
\nserious trouble.<\/p>\n
There is, however, one fundamental prerequisite in order to
\nmaintain the political viability of the reform process -- public
\nsupport. People will continue to support economic and
\nbureaucratic reform only if its excesses can be minimized. These
\nexcesses, if allowed to worsen, will sooner or later destroy the
\nvery foundations -- social, economic and political stability -- of
\nthe development process itself.<\/p>\n
Among the most conspicuous excesses are the widening gap
\nbetween the rich and the poor due to the maldistribution of
\nincomes and the lack of public participation in the growth
\nprocess. The government is addressing one aspect of the problem-
\nincidence of poverty- by pursuing concerted, better-targeted
\nprograms to alleviate poverty. However, more concrete, consistent
\nmeasures are required to ensure a broad-based pattern of growth,
\nand consequently generate sustained increases in the real incomes
\nof the majority of the population.<\/p>",
"url": "https:\/\/jawawa.id\/newsitem\/policy-stability-1447893297",
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"sponsor": "Okusi Associates",
"sponsor_url": "https:\/\/okusiassociates.com"
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