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)