Tough times ahead<\/p>\n
The nation is in for the roughest stretch of the economic
\nreform process over the next six months as all price subsidies
\nfor essential commodities, except rice and soybeans, will be
\neliminated by October.<\/p>\n
The target dates for the implementation of the structural
\nreforms, as agreed on by the government and the International
\nMonetary Fund on April 7, call for the phasing out of subsidies
\non sugar, wheatflour, corn, soybean meal and fish meal. Fuel and
\nelectricity subsidies must also be eliminated within the current
\nfiscal year.<\/p>\n
This means that for most households the economic crisis will
\nget much worse before it starts to stabilize and eventually
\nrecover.<\/p>\n
These hardships are unavoidable if we are to strengthen the
\nfoundation of our economy by cleansing it of past excesses and
\ninefficiency carried over from the economic boom of the past 20
\nyears.<\/p>\n
But higher prices for essential goods are not the only source
\nof economic suffering. More companies may have to fold, with the
\nconsequence of massive layoffs and bigger bad debts, as the
\ngovernment is required to maintain or even to further raise the
\nalready punitively high interest rates during the stabilization
\nperiod.<\/p>\n
The banking industry, also, may be in for bigger jolts as the
\noperation of more banks, battered by high interest rates and huge
\nsums of bad loans, may have to be suspended. Cumulative inflation
\nfor the calendar year is projected at almost 50 percent.<\/p>\n
It is nonetheless a consolation to know that the revised
\nreform package already has a much better built-in social safety
\nnet.<\/p>\n
Unlike the Jan. 15 package, which required the phasing out of
\nsubsidies for essential commodities by this month, the latest
\nprogram allows for a more gradual subsidy reduction over a longer
\nperiod of time. Furthermore, the subsidy scheme has been expanded
\nto cover generic medicines.<\/p>\n
Of importance too is that preparations are already underway
\nfor massive labor-intensive projects with extensive financing
\nfrom the World Bank and Asian Development Bank, to provide jobs
\nfor the millions of workers left unemployed by business failures.<\/p>\n
International aid will also enable the state budget to
\ncontinue subsidizing credit for cooperatives, small businesses
\nand low-cost housing programs.<\/p>\n
But there is a possibility that the hardships ahead may not be
\nas devastating as the prognosis or may not last as long as
\npredicted if consistent reform implementation speeds up the
\nprocess of restoring confidence in both the government and the
\neconomy.<\/p>\n
In fact, the package predicts that the rupiah exchange rate
\nwill strengthen rapidly between this month and June and will
\neventually stabilize below 6,000 to the U.S. dollar possibly
\nlater this year, compared to about 8,000 at present.<\/p>\n
A strengthening and stabilizing rupiah will help remedy the
\ndifficulties and accelerate the economic stabilization process,
\nthereby reinvigorating businesses.<\/p>\n
But, once again, this possibility depends entirely on how able
\nand willing the government is to execute the reforms in
\naccordance with the set schedules and on how the government
\nresponds to the demands of the demonstrating students, notably
\nthose related to the development of good governance and the
\nelimination of corruption, collusion and nepotism.<\/p>\n
A superficial response, let alone suppression of these
\ndemands, would affect the political stability and consequently
\ndisrupt the implementation of reform.<\/p>\n
Backtracking again on the reforms during the package's three-
\nyear implementation period will not only negate the hardships the
\nnation has and will suffer but will also bring about the collapse
\nof the economy and political leadership.<\/p>\n
Given this crucial moment for the nation's future, the public
\n-- citizens, politicians, businesspeople, the mass media, non-
\ngovernmental organizations -- are not only required to sacrifice
\nbut are also duty-bound to actively monitor and supervise how the
\ngovernment goes about implementing the reforms.<\/p>",
"url": "https:\/\/jawawa.id\/newsitem\/tough-times-ahead-1447893297",
"image": ""
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"sponsor": "Okusi Associates",
"sponsor_url": "https:\/\/okusiassociates.com"
}