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.