Total reform of the economy not practical: Expert<\/p>\n
JAKARTA (JP): The view that Indonesia needs a complete
\nstructural economic reform to lift its economy out of its worst
\never economic crisis might not be practical, a foreign expert
\nsaid here yesterday.<\/p>\n
\"This is a very radical view. It suggests that you need to
\nhave a clean sweep of everything,\" said the deputy director
\ngeneral of the Australian Agency for International Development
\n(AUSAID), Peter McCawley, yesterday at a seminar organized by the
\nIndonesian Institute of Sciences (LIPI).<\/p>\n
He explained that this view was based on the perception that
\nIndonesia's current economic crisis was the result of imperfect
\nmarket conditions caused by over 20 years of corruption,
\ncollusion and nepotism in the economy.<\/p>\n
Indonesia will, therefore, need complete reform to eliminate
\nthe structural problems across the economy, he said.<\/p>\n
\"This interpretation is a very pessimistic view. You need 20
\nto 40 years to tackle the entirety of this problem. The agenda
\nis too large,\" he said.<\/p>\n
The International Monetary Fund has been considered the
\nstrongest supporter for complete market reform to help the
\ncountry recover from the economic crisis. The Fund is organizing
\na multibillion dollar bailout to finance the country's economic
\nreform programs.<\/p>\n
McCawley, however, warned that proponents for complete reform
\nshould consider the possibility of unexpected consequences.<\/p>\n
\"When you introduce reform, you are often faced with
\nunexpected results,\" he said.<\/p>\n
He pointed to the country's 1988 banking reform which
\nliberalized the financial sector, but then became one of the
\nmajor causes for the current crisis.<\/p>\n
\"To let market forces work, you need a strong regulatory
\nenvironment,\" he said.<\/p>\n
He added that the weak legal system had also dislodged the
\nWorld Bank-sponsored liberalization policy in the real sector,
\nwhich only created a transfer of state assets to a small group of
\nconglomerates.<\/p>\n
\"The World Bank was very naive. They thought there was free
\ncompetition,\" he said.<\/p>\n
He stressed that to move toward pro-market reform, there must
\nbe a proper balance between the market and the regulatory side.<\/p>\n
He, however, added that overhauling the country's legal system
\nwas quite expensive, as was the case in Australia.<\/p>\n
\"Can you afford an expensive rule of law while many are living
\nin poor conditions?\" McCawley asked, adding that this was a
\ndilemma for developing nations.<\/p>\n
The government, supported by the IMF, is currently preparing
\nvarious new laws including the anti-monopoly law, bankruptcy
\ncode, and the new central bank law.<\/p>\n
He also said that Indonesia must manage its international
\nsupport well because the country would need foreign aid,
\nparticularly to cover the large fiscal gap resulting from the
\ngovernment's huge subsidy commitments at times when domestic
\nrevenue is declining.<\/p>\n
\"I can assure you that Australia will provide positive support
\nfor Indonesia,\" he said.<\/p>\n
He, however, added that the European view on the country was
\nstill cautious.<\/p>\n
\"Its rather difficult for investors and donor institutions to
\nmake predictions amid the political instability,\" he said.<\/p>\n
He also said that the government should not control price
\nincreases too tightly, especially those which were being
\nsubsidized, including electricity. (rei)<\/p>",
"url": "https:\/\/jawawa.id\/newsitem\/total-reform-of-the-economy-not-practical-expert-1447893297",
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