Government intervention in economy still needed

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.