Economist queries govt's role in the market
Economist queries govt's role in the market
MEDAN, North Sumatra (JP): The government's intervention in a
managed market economy may not guarantee greater welfare for the
people if it is not carried out flexibly and transparently, an
economist says.
Anwar Nasution of the University of Indonesia's School of
Economics said here yesterday that while there is no formula to
determine how much a government should intervene in a market,
sometimes no intervention is better.
He cited Bank Indonesia's recent intervention into privately-
owned Bank Pacific, which he said showed a lack of transparency
on the part of the central bank.
"Of course, intervention by BI was needed, but the assistance
it gave to Bank Pacific was not transparent... And such support
has been given many times," he said at the 13th congress of the
Indonesian Economists Association.
Nasution said he was convinced that BI did not merely provide
technical assistance but financial support as well.
Such cases, he said, show that part of BI's domestic credit
agenda is to help certain banks in trouble.
"Lack of transparency in the banks' mechanisms and goals makes
BI a lender of last resort for the banks it favors," he said.
Nasution said it will be difficult for BI to implement a tight
money policy and narrow the gap between interest rates in
Indonesia and those overseas if the banking industry's financial
condition and banking practices are not improved.
Miranda S. Goeltom, a deputy assistant to the coordinating
minister for economy and finance, acknowledged the significant
role of the government in a managed market economy. She added,
however, that the private sector must help ensure that government
intervention is kept to a level that doesn't distort too much.
Professionalism
"This can be done by increasing the professional competence of
everyone who has an influence over price regulations or output.
Businessmen must be professional entrepreneurs, executive
agencies must be professional bureaucrats and legislators must be
professional parliamentarians," she said.
Professionalism, Goeltom said, is needed for businesses to
operate as efficiently as possible. It is also important for the
government to have almost the same amount of information on cost
production as businesses and for the House of Representatives to
be aware of the appropriate balance between the rent obtained by
businesses and the cost put out for it, she said.
As a first step in this direction, Goeltom suggested that all
players increase their knowledge and ability to analyze the
market in order to level the playing field.
At the same time, it is also necessary to improve legal and
regulatory procedures.
"Inefficiency can only get worse if there is collusion between
the government, businesses and the controlling body," Goeltom
said.
"Least-distorted government intervention is most often needed
in situations where the market economy fails," she added. (pwn)