Transformation of economic system needs a boost<\/p>\n
JAKARTA (JP): The transformation of Indonesia's economic
\nstructure, which has generated a 6.9 percent average growth rate
\nover the past three decades, has not been followed by a sound
\ntransformation of its economic system, an economist says.<\/p>\n
Sjahrir, a lecturer at University of Indonesia's School of
\nEconomics, told a one-day seminar yesterday that the country's
\nrapid economic growth has so far been unable to guarantee a high
\nlevel of efficiency, at either the micro or the macro economic
\nlevel.<\/p>\n
"The impressive growth of Asia's economy, including Indonesia,
\nwhich is sometimes dubbed 'miraculous', has mostly been the
\nresult of enormous investments in capital, human resources and
\neconomic assets," he said, quoting the observation of leading
\neconomist Paul Krugman.<\/p>\n
"But it has not been the result of improved efficiency. The
\nbiggest question we are facing now is whether we can continue to
\ntransform the country's economic structure and, concurrently,
\nboost the efficiency of the economic system," Sjahrir said.<\/p>\n
The seminar, which discussed finance and banking in Indonesia,
\nwas opened by Bank Indonesia Governor Soedradjad Djiwandono. It
\nalso featured economists Dorodjatun Kuntjoro-Jakti, Marzuki Usman
\nand Rijanto Sastroatmodjo as panelists.<\/p>\n
Sjahrir said that Indonesia exercise caution in relation to
\nthe process of globalization, which implies not only the free
\nflow of goods and services but also the free flow of capital.<\/p>\n
"It is very important for Indonesia, which has a free foreign
\nexchange regime, to closely watch the shifts in the world's
\ncapital flows," he said.<\/p>\n
Speaking of the international currency market, which currently
\nhas a daily turnover of up to US$1.3 trillion, Sjahrir said the
\nrupiah should not be over-valued if the government cannot control
\ninflation.<\/p>\n
"Can we, amid the world's rapid changes, reduce the
\ndiscrepancy between our inflation rate and the depreciation rate
\nof the rupiah against the American dollar?" he asked.<\/p>\n
If Indonesia is unable to narrow this gap, he said, it will
\nbecome harder in the future to keep the rupiah at a stable level.<\/p>\n
To keep the rupiah stable, he said, "domestic interest rates
\nhave to be kept at high levels. That means that capital inflows
\nwill mostly consist, not of productive investments, but of
\nspeculative funds which are short term."<\/p>\n
Sjahrir said that Indonesia's increasingly open economy should
\nbe matched by an opening up of the society in general, such as by
\nallowing more democracy and freedom.<\/p>\n
Government policies should consist, not only of those in favor
\nof a more liberal economy, but also those which encourage
\neconomic justice and narrow the economic gap in society, he said.<\/p>\n
Sjahrir criticized some of the government's policies as being
\n'anti-market'. Those policies, which the economist said were
\nintroduced to benefit particular interests, were distorting the
\nmarket mechanism, he said.<\/p>\n
Meanwhile, Dorodjatun, the dean of the University of
\nIndonesia's School of Economics, said that in the coming years
\nthe government should continue to open up the country's economy
\nthrough further deregulation to attract investment and increase
\nthe proportion of foreign ownership in listed companies.<\/p>\n
"I think Indonesia should gradually allow for an increase in
\nforeign ownership in listed companies from the present level of
\n49 percent to 55, 60 and more," he said. (pwn)<\/p>",
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