Government intervention in economy still needed

By Prapti Widinugraheni

MEDAN, North Sumatra (JP): The 13th congress of the Indonesian Economists Association (ISEI) closed here yesterday with its participants agreeing to the inarguable need for government intervention in the country's economic system.

The participants also noted the need for the government to manage the country's macroeconomics and, at the same time, supervise the manufacturing sector to achieve sound development.

"Maintaining consistency and a link between macroecomonic and microeconomic policies is increasingly important for the country to survive in a competitive market," a statement issued at the congress' closing session read.

It was for this reason that the economists considered deregulatory and bureaucracy-reduction measures should continue to be carried out. Such measures, they said, will increase the flexibility of the country's overall economic process and, in turn, strengthen Indonesia's economic competitiveness.

The congress unanimously reelected yesterday Marzuki Usman as ISEI chairman for a second term, which will end in 1999. ISEI's central board member list will be completed in a month.

The three-day congress discussed topics related to the challenges faced by a managed market economy in entering the 21st century.

Congress participants also agreed that the deregulations issued so far by the government have resulted in new challenges for the government because such measures are expected to help protect the public from unhealthy competition and maintain an economic-democratization process.

The congress also noted the important need to create and develop good governance and fair business practices -- both on the part of the government and private sector -- as a way to improve existing economic institutions.

"In short, the most appropriate response to the challenges of the 21st century is to create structural conditions and economic processes which lead to the concept of 'getting prices and institutions right'," the statement read.

The topics discussed during the congress included the money and capital markets, the manufacturing sector, the agricultural sector, the managed-labor market and business partnerships.

On the money and capital markets, the congress noted that the increasing flow of capital into Indonesia required better economic management through improved monetary and fiscal systems.

"Stabilization efforts (for the macroeconomic system) need to show more budgetary disciplines and more dynamic fiscal management," it stated.

Any government intervention, however, should not cause new distortions but instead, create market infrastructure that can help the market operate more efficiently.

On the manufacturing sector, the congress stated the recent drop in this sector's competitiveness has become a major concern to national producers.

Apart from that, the concentration of resources to a limited number of industries has resulted in pricing rigidities which, in turn, may cause disadvantages not only for consumers but for producers -- particularly foreign ones -- as well.

"Nonprice competitions have also become a factor that cuts back on the competitiveness of this sector. The concentration of companies operating on the domestic market has raised doubts as to whether or not they can compete on the international market," the statement read.