Development goes on

This year, April 1 marked two very important events as far as economical development is concerned. It kicked off the start of the fourth year of the Sixth Five-Year Development Plan and the enforcement of the new customs law, the first such legislation enacted in the country's history.

The first event, which coincided with the start of the 1997/1998 fiscal year, was not marked by any special ceremony, apart from cabinet ministers traveling to the 27 provinces to present to the governors the budget documents related to the development projects to be implemented in their respective provinces in the current fiscal year.

But all the more encouraging is the fact that the fiscal year started with good news. The year's first deflation rate of 0.12 percent was recorded last month. This trend is especially welcomed in a year known for its heavy political agenda as the country gears up for the month-long preelection campaign later this month, the general election on May 29 and the inauguration of the new People's Consultative Assembly and House of Representatives later in October.

The finance ministry said inflation throughout the 1996/1997 fiscal year declined to 5.17 percent from 8.86 percent the previous year. It was the lowest inflation posted in a fiscal year since 1985/1986. In terms of calendar years, inflation in the first quarter also fell to 1.96 percent from 3.26 percent in the corresponding period last year. This, combined with the conservative fiscal policy of the state budget, should reassure businesspeople of the government's determination to uphold its prudent macroeconomic management.

Policy consistency is now even more essential in view of the election year, which in many other developing countries often bring inconsistent short-term measures to canvass votes. Policy stability now is also more crucial to maintain capital inflows in view of the strong pressures on the balance of payments. The current account is especially worrisome, with a deficit projected to reach as high as 4 percent of gross domestic product.

It is in this context that we consider the introduction of the new customs procedure for clearing imports an important event. The new procedure has replaced the 12-year-old preshipment inspection system, a system hailed by businesspeople as the most efficient, well-managed import inspection system ever introduced in Indonesia. The customs service plays a pivotal role in facilitating international trade, which in turn is a vital component of the economy.

Though the Indonesian customs service has yet to prove that it is no longer the corruption-infested agency it was before mid- 1985 when it was stripped of its import inspection authority, the government has decided it is now the right time to return the inspection authority fully to the customs service. This is good for national prestige and, no less important, it also will save the government almost US$100 million annually which would otherwise be spent on import inspection services at points of loading.

We are sure the government is fully aware of the devastating impact on the economy if the new customs procedures were to cause delays in import flows or increase the cost of importing. This is because imports are vital to the economy. The manufacturing industry depends largely on imported materials and intermediate goods. Investment projects rely almost entirely on imported capital goods.

The government is unlikely to hesitate in taking drastic corrective measures if customs officials foul up again. We cannot afford our export competitiveness to further erode at a time when the rate of export growth has been declining. Moreover, most labor-intensive factories, which contribute a great deal to exports, are required to implement the new minimum wages this month.

National prestige usually takes a backseat whenever national economic stability is at stake. In the past, the economic policymakers have often taken daring moves and will undoubtedly make an equally bold decision if the new customs procedures threatened to adversely affect import flows.