Businesses, analysts await full details of latest reforms

Businesses, analysts await full details of latest reforms

JAKARTA (JP): Businesspeople and analysts said yesterday they
had well-anticipated all the reform measures announced by the
government yesterday, but wanted to immediately learn more about
the details.

They commented they did not find anything new in the package,
but still hoped the deal with the IMF would enable the government
to further ease liquidity without risking further speculative
attacks on the rupiah.

"I strongly hope the government will ease the liquidity pinch
now after the reform package is already set," businessman Sofjan
Wanandi said.

Sofjan saw an easier credit policy as greatly crucial to
prevent the business sector from total collapse.

He said the package would slow down domestic economic
activities for at least two years, but exports would get a
significant boost from the rupiah's depreciation.

Sofjan, chairman of the Gemala Group, predicted that the
economic growth rate would drop from 7.9 percent last year to
about 5 percent to 6 percent this year and 4 percent to 5 percent
next year.

"Still, my projection is on the bullish side. Several foreign
investment banks have even predicted the growth rate will be as
low as 1.5 percent to 2 percent next year," Sofjan added.

Consequently, he said, domestic market demand would shrink
drastically. The property sector and manufacturing industries --
which were oriented largely to local markets -- would be among
the hardest hit sectors.

He projected sales of automobiles would drop by 30 percent to
40 percent, motorcycles by 15 percent to 20 percent and cement by
30 percent.

People would also review their consumption and traveling
patterns. Restaurant businesses would experience a slump of 30
percent, while travel agencies would fall by 50 percent.

Manufacturing companies producing consumer goods would be
forced to find new markets, especially export markets, to
survive.

"This crisis will force us, big businesses, to find new
markets as the domestic market will surely be depressed. It means
we can expect our exports to grow rapidly in the near future," he
said.

For those who could not find a way to sell their products in
export markets would have no choice but to reduce costs. And
layoffs would become the order of the downturn economy.

"Unemployment would certainly rise due to the economic
downturn. And increasing unemployment, worsened by the drought,
will cause an escalation in crime, especially prior to New Year's
Eve and Idul Fitri festivities," Sofjan said.

At this time of distress, he said, the government could not
expect private firms to create new employment opportunities as
they were struggling with their own survival.

"Therefore, what is more important for the government now is
to quickly ease liquidity and lower interest rates to
reinvigorate businesses and create new investment," Sofjan
suggested.

But Sofjan seemed confident the government package would be
able to help the rupiah settle down to an equilibrium range of
3,000 to 3,200 to the dollar.

Economist Nyoman Moena hailed the new reform package
yesterday, but warned that it needed more details.

"I think what the government announced today is not far from
what we had speculated before. The government needs to move
beyond that to satisfy the market," he said.

He said the government needed to clarify all details of its
reform package so the market would not be judged by its own
version.

Currency and stock analysts shared Moena's view, saying the
government's announcement yesterday did not surprise the market
at all.

"There is only one thing the market has not known, that is the
amount of the financial aid. Everything else we have known,"
Tjandra Kartika, vice president of Mashil Jaya Securities, said.

Harita Securities' president Christina Lim said the market had
anticipated the kind of package to be worked out as soon as the
government announced it had sought financial help from the
International Monetary Fund (IMF) early October.

Many rumors had circulated in the market. They ranged from
unaffected sectors to lists of going-to-be-liquidated banks.

A local bank chief dealer said the market had long known the
government would liquidate about 20 insolvent banks as part of
financial reforms attached to the IMF-led financial package.

"You know there has been no big surprise so far. Now we're
just waiting for the list of insolvent banks from the government
to match with the list in our hands," the dealer said. (aly/rid)