Emergency measures

Instead of simply tinkering with the figures of basic assumptions on key economic indicators, the Indonesian government is now preparing what should have been in place and firmly implemented since at least last year. Chief economics minister Dorodjatun Kuntjoro-Jakti said on Tuesday that the government is now preparing a package of emergency measures to prevent the economy from total collapse.

That announcement reflects the government's full realization, although rather belatedly, that it should now act firmly to set in motion a crisis management mechanism to cope with a severely critical condition, which has been worsening due to the grimmer outlook of the global economy as a result of the September 11 terrorist attacks on the United States.

The revised key assumptions used for the 2002 state budget, including a lower economic growth of 4 percent, average rupiah rate of Rp 9,000 to the American dollar, average interest rate of 14 percent and inflation rate of 9 percent, are all realistic given the bleaker economic outlook for most of Indonesia's largest trading partners.

However, the new assumptions will not mean anything in the way of reviving confidence in the economy if the main causes of the economic bleeding do not get urgent and intensive treatment under the auspices of what we have often suggested as being a separate crisis management center.

In another encouraging signal, Dorodjatun also said the government would soon convene a national brainstorming conference to gather suggestions from various institutes and organizations on how the right set of emergency measures should be packaged and enforced. This shows that the government is aware that it badly needs a supportive social and political environment to cope with the economic crisis.

Hopefully, it will not take much longer to formulate the package of appropriate emergency measures as the bleeding has steadily been weakening the economy.

Whatever suggestions are proposed by domestic think tanks and multilateral agencies, such as the World Bank and International Monetary Fund, one thing is crystal clear: the package of emergency measures should include asset recovery, debt restructuring, fiscal consolidation and privatization of state companies.

As we and most other analysts have often argued in this newspaper, a faster pace of asset recovery would reinvigorate hundreds of companies through the infusion of new capital and new management, and would help plug the hole in the budget. An accelerated process of debt restructuring would enable many other businesses to obtain new working capital loans and the government to retire bonds used to recapitalize banks early. This would in turn reduce bond interest expenditure, which has been a major cause of the budget hole.

Equally positive impacts would accrue from the privatization of selected state companies, as proceeds from the sales would help cover the budget deficit and new investors would improve efficiency within the companies. Reduction of wasteful subsidies and more vigorous tax collection would enable the government to set aside bigger allocations for social safety net programs and other labor-intensive projects for economic pump priming.

All of these measures have actually been stipulated in the series of reform agreements between the government and the IMF since November, 1997. They are also the emergency measures implemented by other crisis-hit countries such as Thailand and South Korea, which have now seen much stronger economic recoveries.

Critically absent in Indonesia is a lack of urgency being adopted among the three branches of government -- the executive, legislature and judiciary -- as reflected by the "business-as- usual" manner in which the government is managing the economic crisis.

It is now high time for the whole government to unite in setting in motion a crisis management center to implement whatever emergency measures are necessary to resolve the crisis. Without compromising their respective independence, the three branches of government, as well as local administrations and local legislatures, should now think about and implement only one agenda: leading and managing to resolve the crisis.

Further delays caused by political bickering or due to inordinate nationalistic sentiment will only worsen the suffering of the people who have been living in great pain since the outbreak of the economic crisis in late 1997.