Sumitro says RI's microeconomics weak<\/p>\n
JAKARTA (JP): Indonesia's most senior economist, Sumitro
\nDjojohadikusumo, said yesterday the country's sound
\nmacroeconomics had not been supported by similarly healthy
\nmicroeconomics.<\/p>\n
\"Our microeconomics has illnesses in the forms of market
\ndistortions such as monopoly, oligopoly, cartels, overprotection
\nand subsidies on certain items,\" Sumitro told a meeting of the
\nCivil Servants Cooperatives Organization.<\/p>\n
The distortions increased production costs and caused
\ninefficiency in the economy, he said.<\/p>\n
\"Sooner or later there would be a short circuit in the
\neconomy,\" he said, saying the rupiah's sharp drop against the
\ndollar resulted from weak microeconomics.<\/p>\n
The currency storm, which saw the rupiah drop more than 35
\npercent against the U.S. dollar, caused a sharp increase in
\nprivate firms' short-term offshore loans.<\/p>\n
Sumitro said the high amount of matured offshore loans had led
\nto an increase in the demand for U.S. dollars at home, which in
\nturn caused the faster depreciation of the rupiah.<\/p>\n
Distortions<\/p>\n
Unless the market distortions were eliminated, there would not
\nbe sustainable progress, he said.<\/p>\n
Sumitro said the government's July deregulation and November
\nreform package were useful and could help the economic situation
\nreturn to normal. The packages, however, must be followed up with
\nother measures, he said.<\/p>\n
The July deregulation package slashed the tariffs of certain
\nexport commodities, while November's reform package lifted the
\nState Logistics Agency's intervention on the distribution of some
\nstaple commodities, among other things.<\/p>\n
The two packages must be implemented consistently to make
\nstructural adjustments, he said. This would help smoothen the
\nflow of products, production process, trade and transportation,
\nand would reduce inflation, he said.<\/p>\n
Deregulation would also improve efficiency and make the
\nbalance of payments positive, he said.<\/p>\n
Structural adjustments and improved efficiency would boost
\nIndonesia's exports and make the economy less dependent on
\noffshore loans.<\/p>\n
However, he said vested interest groups always tried to slow
\ndown deregulation efforts.<\/p>\n
\"To speed up the process of deregulation, such as elimination
\nof monopolistic practices, there must be strong political will
\nfrom both the central and the local government,\" he said.<\/p>\n
Sumitro believed the economy would return to normal within the
\nnext two years if both the July and November economic measures
\nwere consistently implemented.<\/p>\n
With such a scenario, Indonesia's economic growth would be
\nable to reach 7 percent within the next three years.<\/p>\n
Analysts predict that the government's tight monetary measures
\nand cutback policy to cope with the currency crisis would slash
\neconomic growth to between 5 percent and 6 percent this year and
\nto about 5 percent next year. (das)<\/p>",
"url": "https:\/\/jawawa.id\/newsitem\/sumitro-says-ris-microeconomics-weak-1447893297",
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