Economic reforms lack direction: CSIS

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.