Experts criticize MPR's special decree on economic recovery

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.