Focus on business

Focus on business

The government's decision to shift the focus of its attention
this year from macroeconomic management to microeconomic
development and the improvement of basic infrastructure is timely
and quite appropriate.

Despite its lack of credibility and its poorer-than-expected
record of performance, the government did deserve some credit for
its achievement in strengthening macroeconomic stability.

The inflation rate last year was checked at around 10 percent
in spite of the rise in utility prices. The rupiah exchange rate
was able to weather the devastating impact of the terrorist bomb
attack in Bali and was controlled at a comfort zone of Rp 8,600
to Rp 9,2000 to the American dollar. The effort to maintain
fiscal sustainability was fairly successful with the state budget
deficit being contained at 1.6 percent of gross domestic product.

All these positive developments enabled the central bank to
gradually lower its benchmark, short-term interest rate from as
high as 17 percent last January to 12.90 percent at present.

But the macroeconomic stability seems unable to stimulate a
high pace of activity in the various sectors of the economy. The
persistently slackening rate of investment, increasingly eroded
business competitiveness, as reflected in the decline of exports,
and the threats by a number of foreign companies to move their
businesses from Indonesia to other countries clearly indicate
that major hurdles still hinder the development in the individual
parts of the economy.

The government also has been fully aware of the major problems
besetting the business sector, as they have often been aired by
industrial associations and foreign chambers of commerce.

Most outstanding among the issues, as top economics minister
Dorodjatun Kuntjoro-Jakti pointed out to the press after a
plenary Cabinet session on Monday, were related to incompetent
and corrupt tax and customs services, too rigid labor rules,
government red tape and corruption, uncertainty about law
enforcement, complications caused by the start-up process of
local autonomy and crumbling infrastructure in many areas due to
lack of proper maintenance.

Dorodjatun did not elaborate as to how the government would
implement its new priority programs.

But given the series of spats over policy issues between
Cabinet ministers, such as those between Trade and Industry
Minister Rini Soewandi, and Finance Minister Boediono and
Agriculture Minister Bungaran Saragih, one cannot help but
conclude that this lack of coordination should be one of the
major problems that Dorodjatun should tackle early on.

This requires Dorodjatun to properly exercise his authority to
ensure that any policy measures pursued by economics ministers be
directed to towards a stronger recovery of the economy. This is
much easier said than done. That task will require a delicate
balancing act because a policy measure in one sector could
initially harm another sector.

As the chief economics minister in charge of coordinating
policies in all economic sectors, Dorodjatun should be able to
act decisively and firmly in overriding any inordinately
compartmentalized attitude of any member of his economic team
within the Cabinet.

As the problems encountered by businesses in a particular
sector usually fall under the jurisdiction of several different
ministers, Dorodjatun needs an effective forum wherein different
ministers, senior officials of various agencies, leaders of
business associations and top bankers work together to resolve
any issues brought up by businesspeople.

Given the severity and multitude of the problems faced by the
business community and the mounting urgency by which these
problems must be resolved, a monthly Cabinet meeting on economic
matters as opposed to the one that the government has held so far
is not effective for tackling the problems faced by the economic
players.

Besides the session has run mostly as a perfunctory meeting
where bureaucratic rigidities and rules are often more important
than bureaucratic action, the gathering does not include
representatives of the main economic agents who are supposed to
implement and be affected by any policy measures adopted by the
government.

In this context, one is reminded of the crisis center at the
Ministry of Trade and Industry. Minister Rini, frustrated and
impatient with the virtual bureaucratic inertia in addressing the
problems brought up by businesspeople, set up the center last
year to be a forum between the government and the business
community.

However, the well-designed concept of the forum failed to work
effectively due to bureaucratic jealousy and lack of cooperation
from other ministries while many of the issues raised by
businesses are outside the trade and industry minister's
jurisdiction.

Dorodjatun would be well advised to take up such a crisis-
center concept to bring ministers and senior officials face to
face with business leaders, all hopefully motivated to resolve
problems by executive fiat on the spot. After all we are still
deep in an economic crisis that requires quick and firm
decisions.