Bank restructuring key to recovery
Bank restructuring key to recovery
Fitri Wulandari, The Jakarta Post, Jakarta
Restructuring the banking sector, the privatization of state-
owned enterprises (SOEs) and legal certainty are three key points
needed to accelerate Indonesia's economic recovery, according to
a local leading economist.
M. Chatib Basri, an economist at the University of Indonesia,
said on Monday that returning banks' intermediary function was
crucial to revive the country's economy.
"If banks could start giving new loans to industries, then
production could run again, boosting economic growth and
eventually absorbing millions of the unemployed," Chatib said in
an interview with The Jakarta Post.
Chatib made the comment in response to a deliberation of a
special decree on economic recovery at the Annual Session of the
People's Consultative Assembly.
In apparent support for the New Indonesia Alliance's (PIB)
criticism of the draft, Chatib said the draft was too general and
lacked focus. PIB has repeatedly stated the draft is too general
and does not provide clear guidelines on how to end the crisis.
Indonesian banks are in the process of restructuring to
improve their lending capability. However, banks are still
reluctant to provide loans to industries that have not performed
well in the sluggish economy for fear of incurring non-performing
loans.
Non-performing loans have a three-month interest payment
period. In the wake of the 1998 economic crisis, many industries
failed to pay their debts to banks, which contributed to the
collapse of the banking sector.
Meanwhile, Rambe Kamarulzaman, the head of the MPR's
Commission B whose task is to deliberate the decree, claimed
legislators had focused their attention on unemployment.
"All factions agree that unemployment is the core of the
problem because it will affect other areas too," he told
reporters after a hearing at the commission.
However, he did not specify how the government should reduce
the number of unemployed.
Meanwhile, Chatib said the second important key point in the
country's economic recovery was the privatization of SOEs to
increase productivity.
"The idea of privatization is to sell idle state assets to get
fresh investment so they can be more productive," Chatib said.
Privatization itself is not a popular policy. The government
has not been able to meet privatization targets as opposition to
sell state assets to foreign investors remains strong.
Of the Rp 6.5 trillion (US$722 million) target expected from
the sale of stakes in 25 state enterprises, the government has
only managed to rake in Rp 2.1 trillion.
Chatib noted that opposition has sprung up because of
misperceptions about privatization.
"Privatization does not aim to tap the state budget but to
increase economic performance by increasing the productivity of
companies," he added.
Both Rambe and Chatib agreed that another key point that
needed to be stressed in the draft decree was legal certainty to
ensure firms could run their business.