Economists welcome economic reforms
Economists welcome economic reforms
JAKARTA (JP): Economists and capital market analysts hailed
yesterday's massive economic reform program as an extraordinary
measure to restore confidence in the country's economy.
They all described the program as a nondiscriminatory bold
move.
"This reform program in fact exceeds market expectations. This
is a bold measure, which is different from the one announced late
last year," David Chang, head of research at Trimegah Securities,
told The Jakarta Post.
"All these measures are extraordinary. The government seems to
be willing to sacrifice certain parties' interests for the sake
of the nation," legislator Mubha Kahar Muang said.
"There is no reason for people to welcome the program with a
cool response. This is really a breakthrough," said Goei Siauw
Hong, head of research at Socgen Crosby Securities.
The reform package included bold reforms to eliminate all tax
and tariff privileges given to the highly controversial national
car program, controlled by Soeharto's youngest son Hutomo Mandala
Putra, and also abolished his monopoly over cloves used in the
highly lucrative clove cigarette industry.
"I think this is the right step for the government to scrap
all special taxes, customs and credit privileges for the airplane
and national car projects. It will reduce the government's
financial burden," said Faisal Basri of the University of
Indonesia.
He said the reduction of subsidies would also lessen the
government's financial burden, but urged the government to pursue
it gradually as people had been burdened by price increases of
certain staples.
The economists and analysts warned that reforms would not
impress the market unless the government implemented them fully
and consistently.
The rupiah closed down at 8,450/8,700 against the U.S. dollar
in Jakarta's spot market yesterday, compared with the previous
day's close of 7,400/7,600.
Stock prices on the Jakarta Stock Exchange also decreased
slightly, with the main price index falling 13.74 points to close
at 387.24.
They also suggested that the government complement the
dismantling of monopolies and cartels with an antitrust law or
equivalent rulings to prevent the shifting of such state
monopolies to private monopolies.
"The scrapping of Bulog's monopoly rights is good, but it has
to be pursued with adequate rulings. We don't want to see the
measure ending up shifting Bulog's monopoly rights to big private
companies," said Didik J. Rachbini of the Institute for
Development of Economics and Finance.
Agriculture analyst Bungaran Saragih shared Didik's view and
said the reforms, if not complemented by enough rulings, would
lead to an unfair income distribution, with farmers losing and
traders gaining.
"Farmers will also face more difficult times as their products
will compete directly with imported agricultural produce,"
Bungaran said.
They praised the government's budgetary move, saying the
revised projections behind the 1998/1999 draft state budget were
becoming more realistic, including the 20 percent inflation rate,
zero economic growth and an exchange rate of Rp 5,000 to the
dollar.
"I think the 20 percent inflation rate is very realistic
because prices have already jumped sharply. Let's hope it is only
20 percent because the percentage could be higher," Didik said.
"Zero growth is also realistic because Indonesia is like a
recovering sick man who has to move slowly to reduce the pain,"
he said.
"All these projections are getting more realistic now. And we
appreciate the government's willingness to adjust them from the
previous unrealistic ones," Mubha said.
The draft state budget, considered by many as unrealistic and
expansive, triggered a rupiah meltdown and stock market crash in
Indonesia and in other parts of the world last week.
(gis/aly/rid)