Experts criticize MPR's special decree on economic recovery

Fitri Wulandari and Tertiani ZB Simanjuntak, The Jakarta Post, Jakarta

Economists warned on Tuesday that a special decree on economic recovery currently being finalized by the People's Consultative Assembly (MPR) would not help the government in accelerating the recovery process.

Chairman of the Alliance of New Indonesia (PIB) Sjahrir, who is also a noted economist, has said that the MPR decree (draft version) "can be interpreted in a number of ways and does not provide a clear focus on how the economic recovery should go."

The MPR adopted a PIB-proposed version when it first drafted the decree, although in later developments the contents largely deviated from the initial version.

The MPR decree is supposedly aimed at providing the government with guidelines in taking difficult economic policies including privatization, reducing subsidies and public debt management to help avoid disputes between government officials and legislators.

The draft was prepared for finalization in the upcoming Assembly Annual Session, slated to run from Aug. 1 through Aug. 10.

The draft stipulates five policy principles, ranging from improvement in coordination between related state institutions to reducing the high-cost economy and improving the structure of the domestic economy.

It also provides four policy recommendations, including pushing for political will from the country's elite to prioritize the economic recovery; measures to overcome political and noneconomic disturbances to help create a conducive climate for the recovery; clear-cut delegation of authority between the government, House of Representatives and the central bank and immediate action from the President and other state institutions to accelerate economic recovery.

But this draft is considered very general and lacking in clear-cut guidelines for all related institutions to come up with integrated economic measures.

"Our version is clearly aimed at strengthening the economy by rehabilitating the banking (sector), and settling foreign debts in transparent ways with donors in a bid to create a breathing space for our state budget," Sjahrir remarked.

According to the PIB version, for instance, in solving the state budget problem, the government must pursue a debt write-off via debt swap schemes. The MPR version, meanwhile, stipulates selective privatization of state-owned enterprises and effective tax collection.

Gadjah Mada University economist Sri Adiningsih said the draft of the MPR decree failed to clearly specify the power of the government as the country's executive in taking economic measures to avoid unnecessary intervention from the House.

Sri underlined that the presence of such a decree was urgent to provide a political umbrella for the government.

"Regardless of how poor is the performance of the economics ministers, they shouldn't be wasting time in doing their job only for insignificant marathon meetings at the House," she told The Jakarta Post.

The government has often bumped into difficulties with legislators, who obtained excessive power two years ago from the amended Constitution, when taking difficult economic decisions to help push for a faster economic recovery.

Among the high-profile examples are the privatization of state-owned cement maker PT Semen Gresik, the sale of government shares in Bank Central Asia (BCA) and the phasing out of the costly fuel subsidy program. The privatization and asset sale program have met with delays that turned relations between the government and its main international creditors sour.

The privatization program and sale of assets under the Indonesian Bank Restructuring Agency are seen as crucial to help revive foreign investor confidence and to help accelerate the country's economic recovery process.

This year, the government has planned to raise Rp 6.5 trillion (about US$718 million) in privatization proceeds to help finance the state budget deficit. But so far, it has only managed to rake in about Rp 2.6 trillion, as political opposition to selling state assets to foreigners remains strong.