Economists say Mega's policies fail to push growth

Economists say Mega's policies fail to push growth

The Jakarta Post, Jakarta

The economic policies taken by the administration of President
Megawati Soekarnoputri have failed to push for the higher
economic growth needed to create more jobs, economists say.

University of Gadjah Mada (UGM) economist Revrisond Baswir
said that the government's tight fiscal policy aimed at
strengthening the rupiah and lowering inflation and interest rate
have not translated into higher economic growth as investments
remain scarce.

"The government's economic policy is moving in the wrong
direction, because it is not in favor of providing the basic
needs of the people like food and jobs," he said.

"Macroeconomic stability is important, but what's more
important is
to open up plenty of job opportunities, in which the government
has failed because of its tight fiscal policy," Revrisond said,
pointing out that the government's tight budget had limited
spending for stimulating the domestic economy.

He was responding to Megawati's speech delivered at the start
of the Annual Session of the People's Consultative Assembly
(MPR), in which she said that the economy this year would grow at
a slower rate of 3.66 percent compared to the initial projection
of 4 percent, as industries had yet to recover from the impact of
the 1997-1998 economic crisis.

Megawati did not elaborate on this, although she told
lawmakers that her government had managed to stabilize the
macroeconomic condition, as reflected in the stronger rupiah,
benign inflation and lower interest rate environment.

Last year, the economy also grew by 3.66 percent. Experts have
said that to create enough jobs for the millions of unemployed,
the economy must grow by at least 6 percent per year.

The Asian Development Bank earlier predicted that this year's
economic growth would likely reach around 3.4 percent, due to a
combination of external and internal uncertainties.

Meanwhile, economist Sri Adiningsih said that macroeconomic
stability had not translated into higher economic growth because
the government had failed to resolve the various uncertainties
faced by businesses such as legal uncertainties, rampant
corruption and labor conflicts.

"Now the priority should be to improve our investment climate,
thus increasing our global competitiveness," Sri said.

Megawati, however, acknowledged that corruption, collusion and
nepotism (KKN) still flourished despite relentless campaigns
against the practices, and therefore posed a danger to the
economy.

"Up to certain degree, the surge in foreign and national debts
and the collapse of our banking system (during the crisis) were
directly related to KKN practices.

"It is ironic that ... KKN practices now occur collectively
among certain politicians, in particular those sitting in
regional legislative bodies," she said.

Revrisond also strongly criticized the government's
privatization drive and asset sales program, because it was a
serious threat to workers who may lose their jobs.

He explained that the sale of various assets, which have
contributed to the inflow of dollars and to strengthening the
rupiah, was forced by the International Monetary Fund (IMF),
whose main interest was only to see that the country repaid its
foreign debts.

But the IMF representative, David Nellor in Jakarta applauded
the government's fiscal policy, saying that the government
remained on track to achieve its full-year budget target,
important to maintain macroeconomic stability.