`Eclectic approach solution for world's dynamic economy'

JAKARTA (JP): Indonesia must adopt an eclectic approach in determining macro-economic policy to face developments in the dynamic world economy, economist Soedradjad Djiwandono argues.

Soedradjad, who is governor of Bank Indonesia (the central bank) said, in an inauguration speech as a professor of economics at the University of Indonesia, that the country has to apply an effective approach to face ongoing problems.

Soedradjad believes that economic policy formulators need to apply several feasible propositions or economic theories in analyzing problems before integrating them into policy.

"We can not implement a single economic theory, even though it is good, to determine policy because it may be ineffective when the objective changes," Soedradjad said.

"But we can not frequently alter policies," he said, adding that frequent changes would mislead Indonesia's economic policy.

Soedradjad stated that the world economy is facing rapid structural changes with globalization in almost every sector.

He said globalization in finance, for example, has brought about the tri-polarization of the world's monetary market between the United States,the market leader, Europe and Japan.

Capital

Globalization in finance has also caused the rapid development of capital markets in the world with a heavy flow of funds from advanced countries into developing countries, he said.

He cited as an example the abundance of foreign funds entering Indonesia during the second semester of last year.

Soedradjad said that in the production sector, globalization has produced a multi-sourcing system, where components of certain products are manufactured in different countries.

The manufacturing of clothes, where parts are produced in three separate countries with materials from other countries, is the often used example Soedradjad commented.

He said globalization in trade and multinational relationships is best illustrated by the economic interdependence of every country in the world, including advanced nations.

Soedradjad believes the United States, which was economically independent in the early 1960s, is now dependent because it can no longer match developing countries' comparative superiority in mass production.

Soedradjad, 55, is the 14th lecturer to be promoted to professor in the University of Indonesia's faculty of economics this year. He is also the 132nd professor to be promoted by the university thus far.

He graduated in economics from Gadjah Mada University in Yogyakarta in 1963 and got a masters degree in the United States. He started teaching at the University of Indonesia in 1979 after being transferred from the Indonesian Institute of Science.

He was a junior trade minister before being appointed as the governor of the central bank last year.(02)