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)