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.