'Cabinet cracks the last thing business community needs'

'Cabinet cracks the last thing business community needs'

Dadan Wijaksana, The Jakarta Post, Jakarta

Apparent cracks between economic ministers over whether Indonesia
should maintain policies sponsored by the International Monetary
Fund (IMF) could prove costly to efforts to speed up economic
recovery, an economist said.

"It impacts the economy in a negative way. When a government
official publicly criticizes a government policy, that will
eventually create uncertainty, which is bad for the economy,"
Centre for Strategic and International Studies (CSIS) economist
Pande told The Jakarta Post on Thursday.

Pande was commenting on signs that the Cabinet, particularly
economic ministers, is becoming increasingly divided over the
role of the IMF and its economic prescriptions.

On one side is Coordinating Minister for the Economy
Dorodjatun Kuntjoro-Tjakti, who insists that the country still
needs the IMF until the end of next year. On the other side is
State Minister of National Development Planning Kwik Kian Gie,
who has launched a campaign to persuade the government to
discontinue the IMF-sponsored economic program after it ends in
November 2002.

The two sides have been trading barbs in the newspapers.
Appeals by President Megawati Soekarnoputri for her ministers not
to go public with their differences seem to have gone unheeded.

Pande said it was important for the economic ministers to
cooperate in designing and implementing policies to help the
economy recover quickly.

Despite growing opposition to the IMF, Dorodjatun, Minister of
Finance Boediono and Bank Indonesia Governor Sjahril Sabirin
signed late on Tuesday a new economic reform plan with the IMF,
in exchange for the disbursement of the fund's next US$340
million loan tranche. The IMF is arranging a three-year $5
billion loan package for the country.

Kwik, a former chief economic minister in the administration
of Abdurrahman Wahid, has repeatedly and openly attacked some of
the key economic policies agreed to by the government and the
IMF, saying they will only push the country deeper into crisis.

Among other things, Kwik has criticized the policy of selling
local banks before replacing the recapitalization bonds held by
them. He says the proceeds the government stands to receive from
the sale of the banks is much less than the amount it will have
to allocate for the bonds' interest payments.

Kwik points to the sale of BCA as an example. He says that
because the bank holds close to Rp 60 trillion worth of recap
bonds, the government has to pay the bank more than Rp 5 trillion
each year in interest payments, almost the same amount it
received from the sale of the bank.

Kwik has questioned the need for the country's continued
dependence on the fund, saying Indonesia's economy would be
growing even without the IMF.

Standing firmly on the other side of the argument are the
remaining economic ministers, led by Dorodjatun. They insist that
Indonesia continues to require the assistance of the IMF in
guiding the country out of the prolonged crisis.

As arguments among the country's top economic officials
intensify, there is concern that economic recovery will suffer.

Pande is of this opinion, saying that uncertainty is the last
thing the business community needs.

"The business community will feel this uncertainty as a threat
to their businesses. This will affect our economy, this is
dangerous," Pande said.

Umar Juoro, an economist at the Center for Information and
Development Studies (CIDES), also noted that differences between
the two sides were wide enough to create problems in the future.

He suggested the President Megawati Soekarnoputri address the
situation to avoid any more confusion.

"The President should come forward and bravely say what the
country should do about the IMF. I think this would cool the
tension a bit," Umar told the Post.

However, when asked whether it was necessary for the President
to dismiss Kwik from the Cabinet, Pande and Umar were quick to
say that this would be way out of proportion and would create new
uncertainty.