Beware renewed crisis

The last few days have certainly seen Indonesia in a very downcast condition, unnerved by the spate of grave warnings from its loyal international supporters that their traditionally fulsome assistance could stop if the government does not set its act straight.

Chief economics minister Rizal Ramli, who is now making the rounds of the country's strongest international allies in Washington -- the International Monetary Fund and the World Bank -- seems to be getting a cool reception. The two multilateral agencies have expressed their utter disappointment with the government's capricious commitment to implementing sorely needed reform measures by refusing to publicly disclose anything substantial about their talks with Rizal.

Earlier over the weekend, President Abdurrahman Wahid was treated to a strong warning from his international advisers that his reform program remained impeded by cronyism, pervasive corruption, partisan politics and special interests. But instead of starting to seriously lead the nation and manage the government, the President decided to go off on another international junket, this time lasting more than two weeks.

Rubbing salt into the wound, the World Bank, which normally sugarcoats its criticism of the government, sternly warns of a new crisis in the country. It bluntly pointed out in a report on Friday that it would cease all new lending to Indonesia if the government's collaboration with the IMF broke down and the bank and corporate restructuring programs stalled. This warning followed an earlier harsh reprimand of the country when the World Bank decided to slash its loan pledges from about US$1.3 billion a year to a mere $400 million starting next year.

Under the current climate of uncertainty in the government, officials and politicians could easily react with irritation to the warnings and resort to inordinately nationalistic outbursts, striking back at the international agencies as interfering in the country's domestic affairs and infringing on its sovereignty.

But all of us, notably the government and politicians in the legislature, would be well-advised to realize that the warnings are well-intentioned, sincere advice from old and trusted friends who have been helping this nation since the late 1960s. The two agencies alone have poured in tens of billions dollars to help the country get over its 1997 crisis at a time when private creditors had virtually excluded the country from their portfolios.

The warnings should instead encourage the government and lawmakers to reconsider their positions so as to see whether we ourselves have been serious and disciplined enough in taking the bitter medicine required to cure the multidimensional crisis we are presently mired in. Foreign assistance can only help so much and may even be frustrated by our weaknesses in or resistance to correcting ourselves.

It is now almost four years since the crisis first assailed our economy and later wrecked havoc with almost every aspect of our nationhood and statehood. But look how negligible has been the progress made in our core reform programs -- namely reform in the judicial, administrative, banking and corporate fields.

The government, therefore, should urgently mend its relationship with the IMF because a breakdown in this collaboration will result in the virtual isolation of the country by the international financial community.

We are still hopeful that more vigorous, frank negotiations will still enable the government and the IMF to sensibly resolve their different stances over the issues of the borrowing policies of regional administrations and transparency in asset sales that have been souring their relations since late last year.

But the government should realize that the great concern about the independence of the central bank that has become the bone of contention in its latest spat with the IMF is shared by all foreign creditors and investors, and even national businesspeople as well. It is entirely pointless for the government to argue that the IMF has no business at all in querying the proposed amendments of the central bank law as they are not referred to in the reform agreement with the IMF.

An independent central bank, especially given the present climate of uncertainty in government, is vital to maintain confidence in and to lend credibility to macroeconomic management. As the central bank (Bank Indonesia) is the manager of monetary policy and controls the money supply, it is supposed to be above politics. One can imagine how scared will be the international and domestic markets if Bank Indonesia is vulnerable to the whims of the government, especially the current one, which has lost most of its credibility.