Economic reforms lack direction: CSIS
Berni K. Moestafa, The Jakarta Post, Jakarta
The roots of Indonesia's slow economic recovery lie in the absence of a clear sense of direction, which has bred ineffective reform policies as the country has sought to escape the economic doldrums over the past four years, according to the Centre for Strategic and International Studies (CSIS).
CSIS blamed the lack of direction on the absence of a public consensus on the government-led reform policies.
"An important first step is to have greater public debate to define the long-run objectives of economic policy," CSIS said in a summary of a joint research project conducted with New York's Columbia University.
The research discussed Indonesian economic institution- building in a global economy. CSIS presented the results during seminars held in Jakarta and Surabaya last week.
Among its regional peers, Indonesia was the worst hit when the economic crisis struck Southeast Asia in 1997.
The crisis has opened the floodgates for both economic and political reform, a process Indonesia is still struggling with four years on.
"Slow progress on reforms and restructuring as well as continued weak confidence will mean lower growth rates and a longer period - anything from eight to 10 years - for Indonesia to reach its potential real level of income," CSIS said.
But it added that Indonesia's economy may have bottomed out, and that major structural changes were underway.
"There is now the opportunity to reestablish a consensus on economic policy objectives," the research institution said.
The direction of Indonesia's reform policies is broadly outlined in the lending agreement between Indonesia and the International Monetary Fund (IMF).
The Fund, focusing more on monetary and fiscal reforms, also acts as a barometer for loan programs of the World Bank and the Asian Development Bank, which handle structural reforms like those relating to the judicial system or the restructuring of the energy sector.
But their dominant role in setting the direction of Indonesia's reform policies has often sparked local criticism.
For its part, the IMF has urged the government to better publicize the importance of IMF sponsored programs such as privatization.
Confining talks on reform policies to foreign lenders may result in a lack of support or even opposition during their implementation.
"The leadership needs to be able to articulate a clear vision of what constitutes a desirable Indonesian economic system, and this vision needs to have public support," CSIS said.
Failure to do so, it said, produced reform policies that did not meet, or only partially met, the stated goals while creating distortions and costs elsewhere.
Lack of public support also breeds recurring tensions between various economic players. They range from issues such as state against private, local against foreign, and small against big business.
"The only way a consensus can be reached on these issues is to begin a broad ranging, informed and continuing debate at the national and regional levels," CSIS said.
But it added that even after a consensus was reached, a no less important task would be to implement the reform steps.
"It is important to get reforms basically right, not just passed," it added.