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