WB calls for more transparency<\/p>\n
JAKARTA (JP): The World Bank is urging Indonesia to tighten
\nits fiscal and monetary policies and introduce more transparency
\nand competition in all sectors to minimize the risks of
\noverheating and a fall in investor confidence.<\/p>\n
In its latest annual report on Indonesia's economy, the World
\nBank stressed that maintaining investor confidence is even more
\ncrucial now than ever to cope with the estimated increase in the
\ncurrent account deficit.<\/p>\n
\"Sooner or later, confidence falters in countries with large,
\nincreasing current account deficits,\" cautions the report, which
\nwas distributed yesterday morning to the government and
\nIndonesian creditor members. In addition, for the first time in
\nits 25 years of publication, the report was introduced to the
\nmass media later in the afternoon.<\/p>\n
The World Bank projects that the deficit in the current
\naccount of Indonesia's balance of payments will increase to
\nUS$8.8 billion in the current fiscal year 1996\/97, beginning last
\nApril, to $10.7 billion in 1997\/98 and $11.7 billion in 1998\/99.<\/p>\n
The 121-page report, which is supplemented with a statistical
\nannex, contains the standard macroeconomic analysis, charts out
\nthe unfinished agenda of deregulation and, for the first time,
\nincludes development issues in the eastern region.<\/p>\n
The Indonesian government early this week revised upwards the
\nestimate of its current account deficit in fiscal 1996\/97 from
\n$6.9 billion to $8.7 billion because the projected growth in
\nimports turned out to be too low and growth in exports too high.<\/p>\n
Dennis de Tray, director of the World Bank Resident Staff,
\nwhile introducing the report at a news conference yesterday,
\nstressed another reason besides the strong pressures on the
\nbalance of payments, as to why the maintenance of prudent
\nmacroeconomic management is even more crucial now than ever.<\/p>\n
De Tray noted that the international community would be
\nwatching Indonesia more closely in view of the upcoming general
\nelections next year, the recent passing away of Mrs. Tien
\nSoeharto and the succession of the national leadership in 1998.<\/p>\n
\"They will be asking more questions,\" added De Tray, who was
\naccompanied by World Bank economists James A. Hanson and Timothy
\nCondon, who is the leader of the team which prepared the report.<\/p>\n
Budget surplus<\/p>\n
Among the fiscal policies recommended by the World Bank are a
\nfurther increase in the state budget surplus to as large as 2
\npercent of the gross domestic product, raising fuel and
\nelectricity prices, forestry fees and property assessments for
\nthe collection of property tax, reducing public spending on power
\ngeneration and telecommunications, slowing the growth of
\npersonnel spending, developing better sources of non-tax revenues
\n(service or user charges) and further speeding the prepayment of
\nforeign debts.<\/p>\n
\"Prudent policy is to contain domestic demand -- consumption
\nand construction -- so that growth in consumer goods and
\nintermediate imports slows in order to accommodate higher capital
\ngoods imports,\" the report says.<\/p>\n
The report estimates a high rise in capital goods imports as a
\nresult of the dramatic increase in both domestic and foreign
\ninvestments.<\/p>\n
\"Telecommunications equipment imports alone will be a big
\nbubble within the next two years,\" noted De Tray in referring to
\nthe coming massive telecommunications expansion by state and
\nprivate operators.<\/p>\n
The World Bank highly praises Indonesia's robust economic
\ngrowth as one of the highest among the developing countries, but
\nit cautions that the quality of growth has now become an issue.<\/p>\n
\"The general conclusion is that the quality of growth could be
\nimproved significantly through the introduction of more
\ntransparency and competition,\" the report says.<\/p>\n
The report observes that deregulation has led to the rapid
\ngrowth in the Gross Domestic Product, but deregulation has
\nbypassed a number of commodities administered by the National
\nLogistics Agency (Bulog) and their distributors, petrochemicals,
\nthe automotive sector, forestry and strategic industries.<\/p>\n
\"Financial deregulation has increased access to credit, but
\nlarge classified loans by state banks to large borrowers and
\nviolations of the restrictions on related group lending suggest
\nthat the financial system sometimes benefits insiders,\" the World
\nBank says.<\/p>\n
The report suggests that Indonesia's creditor consortium --
\nthe Consultative Group on Indonesia -- which will meet in Paris
\nin the middle of next month, commit official assistance at an
\namount at least similar to last year's pledge ($5.3 billion).<\/p>\n
Official aid, the report argues, will improve the structure of
\nexternal finance and reduce Indonesia's vulnerability to the risk
\nof sudden shifts in volatile private capital flows. (vin)<\/p>\n
Report -- Page 9<\/p>", "url": "https:\/\/jawawa.id\/newsitem\/wb-calls-for-more-transparency-1447893297", "image": "" }, "sponsor": "Okusi Associates", "sponsor_url": "https:\/\/okusiassociates.com" }