Economists warn government over inconsistencies
Economists warn government over inconsistencies
JAKARTA (JP): Economists warned yesterday that microeconomic
policy inconsistencies would weigh down the country's
macroeconomic management and eventually cause its downfall.
Sri Mulyani I. Sumartono from the University of Indonesia said
many government policies distorted market prices and benefited
only certain groups. But the macroeconomy seemed unaffected.
"Our microeconomic situation is messy now, but we don't know
why our macroeconomy remains sound. It seems there is no linkage
between microeconomic and macroeconomic policy," Sri Mulyani told
a seminar at the Centre for Strategic and International Studies.
She cited the national car policy, which exempted a company
owned by President Soeharto's son Hutomo Mandala Putra from taxes
and import duties for three years, as an example of policy
inconsistencies.
"Sooner or later, however, there will be an impact because
usually there are delayed effects. If last year our macroeconomy
was not affected by our car policy, we might see the effects this
year or next, or the next two years," Sri Mulyani added.
Sjahrir, managing director of the Institute for Economic and
Financial Research, shared Sri Mulyani's opinion. He said
Indonesia would face a macroeconomic catastrophe if the
government did not fix the sector.
Sri Mulyani suggested the government minimize its intervention
in the already running market mechanism to help create efficient
pricing in the market.
In many cases, Sri Mulyani said, government intervention in
market mechanism results in higher costs for the people.
"Government intervention in the market mechanism would not be
free from vested interests. So, let the market do its job," Sri
Mulyani said.
"Sometimes a market mechanism is inhuman, but it is much
fairer and more transparent to follow. It helps distribute more
efficiently scarce resources to sectors in need," she added.
Unlike in the microeconomic level, Bank Indonesia managing
director Boediono said, any mistakes in macroeconomic management
would be instantly felt in the market.
"In the era of globalization, the penalties of a policy
mistake comes very quickly with no exception. Fortunately,
Indonesia so far has a good record in macroeconomic management,"
Boediono said.
He said Indonesia needed to continue pursuing prudent
macroeconomic management to avoid possible macroeconomic
disaster.
He also warned that any policy mistakes in the micro level,
especially in the financial sector, would also have serious
consequences.
"If unlucky, a failure of a financial institution could have a
cumulative effect that could head toward a crisis," Boediono
said.
Miranda S. Goeltom, an expert at the National Development
Planning Board, agreed that any development in the international
market would influence Indonesia's macroeconomic management.
Excessive foreign capital inflows, especially speculative ones
benefiting from interest rate differentials, would complicate
macroeconomic management if not followed by efforts to neutralize
the effect.
In addition, Miranda said the government should continue to
use a fiscal policy to influence market behavior, especially in
terms of employment, price stability and economic growth.
She said the government should improve revenue from taxes
rather than from foreign borrowing to finance its development
spending.
She said the government could still improve its tax revenue by
intensifying tax collections, especially from small taxpayers,
and maximizing taxes from large taxpayers.
"I suggest the government form a special unit, consisting of
noncorrupt and knowledgeable tax officials, to enhance tax
revenue from large taxpayers," she said.
Large taxpayers were likely to understate their income because
they well-understand the tax regulations and the loopholes, she
said.
"By assigning a special team to target them, we would be able
to increase our income tax revenue," Miranda said. (rid)