ECONIT blames economic team for slow recovery

JAKARTA (JP): The Advisory Group on the Economy, Industry and Trade (ECONIT) said on Tuesday the country's sluggish economic recovery was a result of the poor overall performance of the economic team in the Cabinet.

The consultancy firm's latest quarterly report said the team's weakness originated from an absence of operational leadership, which was pivotal in translating strategies into operational policies and actions.

"They have failed to formulate a common agenda and common priority because they do not share visions and perceptions," the report said.

The Cabinet's economic team has been unable to capitalize on being part of a legitimate government to speed up the county's economic recovery and reform, the report added.

"As such, conditions have weakened the bargaining position of the economic team with the International Monetary Fund and the World Bank," it said.

The team's compromised bargaining position has allowed these international institutions to interfere with detailed government policies, according to the report.

"Matters important to the country's economic recovery were not given attention because the economic team was too busy appointing new officials to executive posts at government institutions and business units," the report added.

This lack of attention further weakened the already poor coordination among the team's members, ECONIT said in its report.

Delays in the implementation of reform programs outlined in the government's letter of intent to the IMF could have been avoided had there been adequate coordination, the report continued.

Developments over the past several weeks underline the mounting pressure on the rupiah, despite the country's sound economic fundamentals and praise of the country by international institutions and creditor countries.

"It has become a worrying sign. The existing high expectations for and confidence in the Indonesian government have taken a downward turn.

"The declining confidence is mainly due to the uncertainty in law enforcement and the more visible conflicts among the political elite over power and possession of economic resources," the report said.

Meanwhile, private investors have begun to look negatively on the prospect of economic recovery in Indonesia, as reflected by sluggish trade on the Jakarta Stock Exchange (JSX), according to the report.

The JSX Composite Index has continued to decline, approaching the 500 level from its intrayear high of 703 points in mid- January.

There was great hope for a smooth economic recovery when the current Cabinet was formed, but these hopes failed to become reality as the economic team failed to take concrete steps to make meaningful improvements in the country's economy.

Trading on the JSX is a main indicator of the trend in the country's short-term and medium-term investments, the report said.

"Capital inflow is usually preceded by portfolio investments in the equity market as well as in the money market.

"The flow of investment funds into the country was needed to make the current consumer-driven economic growth sustainable," it said. (udi)