Basic needs

Basic needs

From Republika

In the present uncertain situation, many in the community are
hoping that the government will take concrete measures to
speedily and carefully normalize the economy. We know that things
needed by the public at present include foodstuffs, medicine,
educational supplies and vehicle spare parts. Of late, the prices
of these goods have soared and in some cases, they are not even
available. People in low-income brackets generally cannot afford
to buy these items any more.

Three factors are responsible for this situation. First,
industries are cutting back production levels due to a scarcity
of raw materials. Second, industries are totally halting
production because they cannot either afford to purchase the raw
materials or because of some other reason. Third, many of the
importers who usually supply commodities have ceased their
activities either because of the high exchange rate of the U.S.
dollar against the rupiah or because of some other factors.

These three things have encouraged some economic agents, such
as distributors, distributing agents and the like, to resort to
hoarding. In connection with the above, allow me to propose the
following:

It would be a good idea if the government extended subsidies
to help industrialists and importers get out of their problems.
Let's say the government gives a subsidy by setting the exchange
rate at Rp 5,000 to the dollar. In this case, it must be ensured
that the money flowing from importers to consumers and producers
is in rupiah and that payment is in U.S. dollars, which importers
make for their imports can be arranged by government banks. In
this way, the love the rupiah push will not stop at being just a
slogan.

As producers/consumers now can afford imported commodities
because of the above, it would be expected that production would
resume. The government must also exercise control over the going
prices. It may well be that the government does not hold any
monopoly over anything but it must exercise such control in the
interest of the public.

If all this runs smoothly, the market condition will return to
normal. Then, with the implementation of the prevailing tax
system, the government can gradually collect its foreign
exchange.

A comprehensive monetary reform, if carried out in a country
with a population of over 200 million people, will only be
burdensome to the country, especially considering the situation
the country is in now. As for businesses outside the government's
control, they cannot be expected to help return the foreign
exchange to the government within a certain span of time.

A monetary reform would better be carried out after a
political reform has been completed. The country is hit not only
by an economic crisis, but also by a crisis of confidence in
almost all aspects of life.

The conclusion is that an economic crisis is not as serious as
a crisis of confidence. It is true that the crux of the matter is
related to external loans. However, this must have been
anticipated in the past few years (with regard to their maturity
dates and the risk they entail).

M. UMAR HADI

Jakarta