Safeguarding reform<\/p>\n
The latest package of economic stabilization and reform
\nmeasures agreed on by Indonesia and the International Monetary
\nFund last week should be welcomed, especially ahead of the June 7
\ngeneral election and after the ruling Golkar Party's nomination
\nof the incumbent B.J. Habibie as its sole candidate for the
\nNovember presidential election.<\/p>\n
The reform package, with clearly set schedules for the
\nimplementation of its various programs under the watchful eye of
\nthe IMF, can serve as a safeguard against any populist measures
\nthe incumbent government might take to woo voters at the expense
\nof the long-term stability and viability of the economy.<\/p>\n
Significant improvements in the country's key economic
\nindicators over the past few months -- deflation over the last
\ntwo months, a steady decline in interest rates, a steady
\nappreciation of the rupiah and a slight recovery in the gross
\ndomestic product -- surely augur well for strengthening public
\nconfidence in the IMF-designed reform programs. These economic
\nimprovements should also convince any newly elected government
\nof the merits of the reforms, thereby helping to secure their
\nsustainability.<\/p>\n
As in many other countries facing an election year, there is
\nno doubt a great temptation or even inclination on the part of
\nthe ruling administration to backtrack on or delay painful reform
\nmeasures in order to avoid short-term political costs, even at
\nthe expense of the long-term good of the economy. This is
\nparticularly true in Indonesia, where political institutions are
\nnot able to properly exercise effective checks and balances on
\nthe government.<\/p>\n
However, the clearly defined reform programs and their
\nimplementation schedules should function as a built-in
\nsupervision mechanism to guard against short-sighted actions
\naimed solely at luring politically uninitiated voters. To put it
\nbluntly, the IMF-designed package makes it extremely difficult
\nfor Habibie, as a presidential candidate, to manipulate the
\nlevers of power to advance his ambitions. In fact, this could
\noccur only if Habibie and his ruling Golkar Party were so hungry
\nfor power as to make them totally unconcerned about the future of
\nthe nation.<\/p>\n
Any tampering with or backtracking on the restructuring
\nmeasures would destroy the buds of confidence which have started
\nto grow among domestic and foreign investors, along with the
\nencouraging signs of economic improvement during the first
\nquarter of this year. Further delay in the restoration of
\nbusiness confidence would worsen the economic crisis and severely
\nthreaten the political stability expected after the June
\nelections.<\/p>\n
Given the uncertainty over the transition from an
\nauthoritarian to a democratic system -- understandable given that
\nthe upcoming polls will be the nation's first multiparty
\nelections in more than 40 years -- the strong macroeconomic
\npolicy and reform programs provide a sense of certainty about the
\nfuture direction of the economy, irrespective of which party or
\nparties win the elections.<\/p>\n
The latest reform package rightly focuses on rebuilding the
\nbattered financial system and developing good governance in the
\npublic and corporate sectors through five interrelated measures:
\nbank and corporate restructuring and loan recovery, currently the
\nmain obstacles blocking economic recovery, as well as the
\npromulgation of new commercial laws.<\/p>\n
Barring any major disruptions of the elections in June, the
\nimplementation of the restructuring program within the next few
\nmonths would further strengthen the process of economic
\nstabilization so that by the time a newly elected government
\nassumes office in December, the process of economic recovery
\ncould begin immediately.<\/p>\n
Recapitalized banks would be able to resume lending to pump
\nfresh blood into the real sector. Production plants would reopen
\nor increase capacity utilization, new jobs would be created,
\ngiving consumers new purchasing power. An improved economy would
\nhelp eliminate the huge corporate bad debt overhang. All this
\nwould in turn further strengthen business confidence, especially
\nbecause the framework of laws and rules ensuring a level playing
\nfield in the market is already in place. Better and stronger
\nlaws, such as those regarding good governance, monopolies and
\ncompetition, bankruptcy proceedings and the independence of the
\ncentral bank, would help make the country an even better place to
\ninvest.<\/p>",
"url": "https:\/\/jawawa.id\/newsitem\/safeguarding-reform-1447893297",
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"sponsor": "Okusi Associates",
"sponsor_url": "https:\/\/okusiassociates.com"
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