Discord in economic team continues

Economists stand by exasperatedly as political interests keep overshadowing steps to recovery, says economist Arif Arryman. He recently spoke to The Jakarta Post during a meeting among former fellow student activists in Yoygakarta. An excerpt of the interview follows:

Question: What is the significance of this meeting of 1977- 1978 activists?

Answer: It is to reconfirm that the so-called reform movement has not ended. The idea of reform raised by the 1998 students is an accumulation of disappointments from 1977 to 1978.

All forces wanting to make a total correction (reform) have to join forces and have to reach a consensus to prevent narrow particular interests from becoming dominant.

The complete correction on the economy, for example, has to be focused only on the economy.

We have to quickly manage the economic structure, the institutions for allocation of economic resources, and fairer economic opportunities at local and national level.

It's now time to provide access and opportunities to the lower middle income group ... to implement regional autonomy to give regional governments their necessary authority. These must be our priorities and they must be done now.

Why? Recovery steps so far ... are stuck. It's because, first, the economic policies and strategies are not stimulating recovery. Second, the management of recovery program is unsteady. There is no coordination. (The officials) are not able to work as a team. They don't have leadership.

Q: Could you elaborate?

A: Just look at some fundamental macroeconomic indicators, such as interest rates, relatively controlled inflation and the growing rate of the quarterly gross domestic product.

All indicate that our economy is recovering. But such a recovery is false ... it is based on consumers. Unless it is followed by adequate investment or capital flow, such recovery won't be sustainable and inherent.

Import growth is much higher than that of export. If nothing is done, this will surely disrupt the balance of payments that will further affect the rupiah's exchange rate. In the last few months, the rupiah's value has been consistently decreasing. The same thing is happening to the stock exchange.

This shows increasingly declining confidence among the local and international business markets ... compared to when the government was just being formed. This has to be changed.

Otherwise, we will be thrown back to the old order. We will lose many chances to make corrections to numerous existing distortions.

Q: Is the present economic team still capable of handling the task?

A: I don't think so. From the beginning, when the Cabinet was formed, I said that this Cabinet was put together through political accommodation, in which political interests, and not professionalism, would be dominant.

That explains why the teamwork among Cabinet ministers, especially those dealing with the economy, lack coordination and cooperation. This is fatal, especially because they are the motor to move and speed up recovery.

Q: Could the recent replacement of ministers be justified as the President's efforts toward recovery?

A: Partial replacement is not enough. We need a complete change in the management of the economics team, which has to be related to the legal enforcement program. Otherwise, it won't be any good. As we see it, none of the legal cases of Soeharto and his cronies, for example, have reached the courts.

To completely understand the problem, therefore, we need a new consensus among the political elite. Gus Dur's (President Abdurrahman Wahid's) government cannot be separated from their support.

But ... now, political interest is quite dominating, especially in the assigning of people to particular positions. This must be stopped immediately.

We can do so by totally replacing those in the economics team and the legal team with professionals with a good track record. Do you see Abdurrahman as being capable of doing so?

Replacing Cabinet members is the President's prerogative.

But when the President does (use this right), the political elite mess about with it.

Therefore, without a new consensus among the political elite, nothing can be done. (Abdurrahman) will surely face a stiff challenge this August (at the General Session of the People's Consultative Assembly). There will be many questions regarding (the replacement of Cabinet members).

That's why I think that now there is a chance for the political elite to come together to agree on something and honor that in relation to the recovery program. A complete correction in politics is needed and it can't be postponed.

Q: What about the role of the National Economic Council (DEN) and the other boards?

A: In a time of crisis like this, what is needed is teamwork. The forming of DEN or other similar boards, in one way or another, only shows that the management in the Cabinet just doesn't work.

That's why I suggest a total change. Form a team that has the capability of team-working, that has synergy with one another. Certainly, some other boards would be needed, but they must have synergy. Otherwise, they will mean nothing. Would such a new team and a new consensus be able to attract foreign investment?

Yes ... many are postponing their investment here because they worry about political uncertainty, about the guarantee of their future earnings ... This (investment) will never come as long as the political situation is shaky.

They (investors) surely think that it would be much better for them to invest in Thailand, for example, or South Korea, or the Philippines, where political stability is much more guaranteed and the economic environment is more conducive.

Yet economic-related problems are a second priority here. As a result ... there is no identical vision and perception among our political elite in how to reform.

Foreign investment in Indonesia is now relatively small, given the absence of political certainty, and where there is no guarantee that the correction made is conducive to capital flow.

Economically, there is no reasonable reason for investors not to invest here. The stagnant investment flow is, therefore, more due to political risk. Country risk here is very high. There is no certainty in policies as well as in the management of the economic recovery programs. (Sri Wahyuni)