Businesspeople hail new economic reform package

Businesspeople hail new economic reform package

JAKARTA (JP): Businesspeople and analysts yesterday hailed the
government's latest reform package as a quick, concerted move to
prevent the economy from collapsing.

Businessman Sofyan Wanandi, banker Mochtar Ryadi, economists
Christianto Wibisono, Mari E. Pangestu and Didik J. Rachbini said
the move would convince domestic and foreign investors the
government was determined to address their concerns.

But they suggested the government quickly put the new reform
package into action to regain investors' confidence in Indonesia.

"The policy is a very good sign. But the government needs to
quickly issue follow-up measures on the ministerial level.
Otherwise, its credibility will deteriorate," Sofyan said.

The government unveiled Wednesday a package of measures to
prevent the country from plunging into a worse financial crisis
amid the regional currency turmoil.

The package includes steps to boost the stock market, cut
budget spending, raise luxury sales tax and cleanse the banking
industry of unsound banks.

Banker Mochtar Ryadi said the new reform would directly
address rupiah and stock market crises simultaneously as the
currency crisis had dragged on the stock market to tumble.

"Domestic and foreign investors -- due to tight monetary
policy, high interest rates, foreign exchange losses by listed
firms and so forth -- had lost confidence in the stock market,"
Mochtar said.

"The currency crisis has therefore created a new crisis, a
capital market crisis," he added.

Consequently, he said, investors had also lost confidence in
Indonesia's economy partly because they doubted the country's
ability to service its external debts.

If the government failed to address the crisis, it would
eventually burn the banking industry, which was already weakened
by the tight monetary policy and high interest rates, he warned.

"But the government has been aware of all of those problems.
And this package is very useful to address those problems,"
Mochtar told journalists before attending a seminar hosted by the
Indonesian Business Data Center here.

Christianto, the center's chairman, described the new reform
package as the government's political goodwill to rehabilitate
its deteriorating credibility.

"This is a preemptive strike conducted independently by a
state in a situation which needs a serious but unpopular
political will," Christianto said.

He praised the government's decision to scrap limits on
foreign purchases of new shares in a bid to restore life to the
stock market, which has dropped 30 percent since early July.

"This is an extraordinary move which could be taken only by a
strong government which is not afraid of its political
implication," Christianto said.

He suggested the government quickly ease liquidity and reduce
interest rates to inject needed blood into the business sector.

The government should not panic in addressing the rupiah as it
has already depreciated 25 percent. The rupiah would be stable at
the current level of 3,000, he said.

"If Thailand's crisis died down after its currency depreciated
25 percent, we should not panic and worry that the rupiah will
weaken further as it also depreciated by 25 percent," Christianto
said.

Economist Mari Pangestu from the Center for Strategic and
International Studies said yesterday the government's move was a
good first step in restoring investors' faith.

But she said it was important concrete actions followed the
move.

"Another question which is difficult to answer is whether more
deregulatory packages are needed to restore investors trust,"
Mari said.

She underlined the importance of hastily restoring investor
confidence to counter what she described as the "negative
contingent", a domino effect which might spread here should
another crisis hit neighboring economies.

Didik J. Rachbini of the Institute for Development of
Economics and Finance, said the new policy was not enough to
handle the current monetary turmoil.

"What is important now is how to ease the panic among the
public. What happens now is no longer a purely monetary crisis
but a sociopsychological problem," he said at a discussion
organized by the institute.

Didiek said there were a number of individuals in the country
who had the ability to either worsen or improve the current
monetary situation due to huge savings.

The government should coordinate these individuals to conduct
a concerted effort to solve monetary problems.

The rich could cool down the current monetary situation if
they were willing to use joint action to solve it, he said.

Rijanto Sastroatmodjo, a Bank Servita commissioner, said he
was not sure if the new monetary policy would be able to solve
the current currency problem since the currency rate was floating
abnormally and the public was in panic mode.

"Previous measures adopted by the government have failed to
improve the situation. Let's see if the new package can make it.
If it fails, all we can do is pray," he said.

Rijanto called on the government to focus on handling
liquidity and leave the currency rate to the market. The
government doesn't have enough resources to control the rate.
(jsk/mds/rid)