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.