Crisis management essential

Crisis management essential

Vincent Lingga, Senior Editor, The Jakarta Post, Jakarta

The Indonesian government, which has been criticized for
sorely lacking a sense of urgency in dealing with the economic
bleeding, could learn from South Korea's success in repairing its
economy in the early 1960s.

When the South Korean government proclaimed in 1962 its
commitment to rebuild the war-ravaged economy through an 'export
or perish" campaign, then-president Park Chung Hee set up an
institutional mechanism that functioned as the nerve center for
crisis management.

Park began conducting monthly National Export Promotion
meetings attended by economics ministers, top bureaucrats,
leaders of business associations, representatives of the largest
exporting companies and top bankers to discuss concerted efforts
to promote exports and to fix any problems faced in the national
drive for economic recovery.

Far from being a perfunctory meeting, the gathering, chaired
by Park himself, was a brain-storming session that brought the
country's political leadership face to face with representatives
of the main economic agents, all working diligently with the sole
purpose of translating political resolve into real action by the
bureaucracy and the business community.

Any issues related to the export drive such as credit
financing, port clearance, imports of inputs and incentives were
settled at the highest level. Park's leadership kept all
officials on their toes and they had to be well-prepared with
intelligent answers to the president's tough questions.

The monthly meeting made bureaucratic action more important
than bureaucratic rules and rigidities, resolving problems by
executive fiat on the spot, all with the clear objective of
repairing the economic ruins through export promotion.

The results, according to Korean government reports, were
quite dramatic, with exports rising from US$52 million in 1962 to
$84.5 million in 1963, expanding to $121 million in 1964 and
increasing steadily to reach $$15.1 billion in 1979 and $20
billion in 1981. Last year, Korean exports totaled $134 billion.

The recounting of this economic success is not meant to
suggest that Indonesia choose the same priority and follow the
path of the authoritarian government of Park, who was
assassinated in late 1979.

But Indonesia can learn a great deal from the Korean
experience in how it effectively conducted crisis management,
setting correct priorities, building up a favorable public-
opinion environment and mobilizing all the resources available to
implement top-priority programs.

The combination of the leadership provided by Park and the
proper management and coordination given by his economics
ministers created a thoroughly conducive environment for the
export drive.

The business community, represented in the decision-making
process, received a strong stimulus to participate in the
national drive.

The fundamental rationale of Park's crisis-management is that
a critical condition requires quick and efficient decisions.

Certainly, the political and social circumstances in Indonesia
now are much different from those in Korea when Park led the
government. The condition here is much more complicated as
President Megawati Soekarnoputri's government is coping with an
economic crisis at a time when the nation has just begun to
experiment with democratic practices.

But Megawati could still adapt Park's crisis-management method
to cope with the economic bleeding, a crisis which all public
opinion polls agree should be the top priority for the
government.

The correct cure to stop the economic bleeding has been
prescribed in the reform agreement with the International
Monetary Fund: Fast resolution of the $60 billion in distressed
assets and corporate debts held by the Indonesian Bank
Restructuring Agency, privatization of a selected number of state
companies, banking reform and fiscal consolidation. The latter
refers to phasing out of wasteful subsidies for fuel and
electricity and vigorous tax campaign.

Without significant progress in these long-delayed areas of
reform, which are related to and influence each other, virtually
nothing else in the way of sustainable economic recovery will
take place.

Of utmost importance is that President Megawati conducts her
Cabinet sessions according to the format and under the sense of
crisis Park enforced in his monthly National Export Promotion
meetings, constantly urging officials and business leaders into
quick action.

A high pace of asset recovery, certainly at deeply discounted
prices, not only will generate additional revenues to the cash-
starved government but will also bring in new investors to
rehabilitate the distressed assets to sound production
operations.

Likewise, restructured corporate debtors will get new access
to working capital loans to fuel production. The privatization of
selected state companies will create a similarly positive impact
on both the state budget and macroeconomic stability.

As more distressed assets get rehabilitated, more corporate
debtors get restructured and more state companies are put under
efficient management, the pace of the economic recovery will pick
up. Consequently, more jobs and tax revenues will be generated.

The faster the economic engine runs, the sooner banks will be
able to resume their intermediation function to pump lifeblood to
the economy through lending operations.

As the pace of the economic recovery picks up, so will the
public's support of the other reform measures. Further down the
line this confidence-building condition will create more
supportive circumstances for other painful reform measures such
as phasing out wasteful subsidies to remove the big hole in the
state budget.