Speedier reforms needed after IMF deal<\/p>\n
The government has signed another agreement over the US$43
\nbillion reform loan package with the International Monetary Fund
\n(IMF). Economist Kwik Kian Gie says Indonesia needs to
\naccelerate political reform in tandem with the new accord.<\/p>\n
JAKARTA (JP): Some people say economics has no bearing on
\npolitics. Institutions like the IMF and the World Bank certainly
\nhave a tendency to belittle the importance of such relations.<\/p>\n
Economic development is linked to other aspects of life, such
\nas culture, security and defense and international relations.<\/p>\n
Corruption, for example, may lead to hypocrisy and dishonesty,
\nand people have now come to equate debt with revenue, or even
\nwealth. In other words, prosperity is no longer identified as the
\nadded value of creativity.<\/p>\n
The accumulation of foreign exchange reserves through foreign
\ncapital is no longer distinguished from the surplus of exports
\nover imports. A deficit budget is called a balanced budget if the
\ndeficit is covered by foreign aid.<\/p>\n
The agreement with the IMF signed June 25 reflects the
\nseverity of the Indonesian economy.<\/p>\n
In the document "The Outline of the Economic Program for
\nIndonesia", the IMF has been forced to focus its assistance on
\nhumanitarian aid, and on keeping the administration running.<\/p>\n
In contrast, previous agreements with the IMF addressed
\nmonetary, financial and fiscal issues as well as the structural
\nadjustment of the production and distribution sectors with an aim
\nof liberalizing the economy and abolishing market distortions.<\/p>\n
The IMF, which has now lowered its estimate on the equilibrium
\nvalue of the rupiah to Rp 10,000 per U.S. dollar from Rp 6,000 in
\nApril, sees the difficulty the government will have in financing
\nits budget due to the fact that the dollar is now hovering the Rp
\n15,000 level. The Fund, which maintains its financial
\ndisbursement in small injections, therefore, is now looking for
\ninternational support to provide at least $8 billion for
\nIndonesia this fiscal year. A major portion of the money would be
\nallocated for the government's social safety net programs aimed
\nat preventing starvation and medicine shortages.<\/p>\n
Because of the deteriorating economic situation and its
\nsubsequent impact on the poor, the political elite now must work
\nhard to prepare creative and innovative concepts to bring the
\ncountry out of the crisis.<\/p>\n
But the nation must solve its political problems as well as
\nits economic ones.<\/p>\n
President B.J. Habibie, who took over from Soeharto on May 21,
\nfor example, is not yet widely accepted as the country's
\npresident. The Armed Forces' (ABRI) top brass has disliked
\nHabibie for a long time for several reasons. One of these is that
\nwhen he served as state minister for research and technology
\nunder Soeharto, Habibie controlled strategic industries which
\nshould have been under ABRI supervision.<\/p>\n
These included PT Pindad, the state-owned weapons
\nmanufacturer, and PT PAL, the state-run shipyard. Habibie also
\ntook over the coordination of the purchase of Navy warships, a
\njob which the Navy felt it was in a better position to handle.
\nHabibie was also known as a big-spending minister and his
\npreoccupation with the development of the nation's aircraft
\nindustry over his ministerial tenure raised questions about the
\nscope of his statesmanship.<\/p>\n
The civilian elite, including retired generals, meanwhile are
\nquestioning the legitimacy of the People's Consultative Assembly
\n(MPR) and the House of Representatives (DPR). These two
\ninstitutions exist in formality only, and their democratic
\nsubstance remains dubious since they do not truly represent the
\npeople's aspirations. The civilian elite is too busy thinking
\nabout political reform and has given little time to think about
\neconomic recovery. Executives of the dominant Golkar grouping are
\nalso busy preparing for their congress scheduled for July 9
\nthrough July 11.<\/p>\n
Politics is indeed important, and it is time for everyone to
\nwork to solve our political problems quickly so that the nation
\ncan concentrate its attention and resources on economic recovery.<\/p>\n
Former economic minister Radius Prawiro in a new book said
\nIndonesia's economic development has largely depended on the flow
\nof foreign loans. No wonder Indonesia's total foreign debt
\nsteadily rose from a mere $3.2 billion at the start of the New
\nOrder government in 1966 to about $130 billion at present.<\/p>\n
The most important agenda for Indonesia is therefore to
\naccelerate political reform and develop creative and innovative
\nstrategies to restore the economy.<\/p>\n
The economy should no longer be developed using past concepts
\nin which the manufacturing sector relied heavily on imports. Our
\nindustry should be developed with domestic resources and geared
\nto meet the needs of the domestic market, at least initially,
\nbefore expanding it to international markets.<\/p>",
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