'Govt must be open on effects of crisis'

JAKARTA (JP): The government must be open about the effects of the currency crisis on Indonesia and what kind of international measures it seeks, as secrecy could lead to more speculation, the Institute for Development of Economics and Finance (Indef) has said.

Indef's chief analyst Didik J. Rachbini said yesterday the lack of transparency in information provoked more speculation in the currency market.

For example, uncertainty about the financial aid package expected from the International Monetary Fund (IMF) to help the government cope with the currency crisis had lowered public expectations about an economic recovery, he said.

"The market was initially optimistic about IMF's help when it was announced last week, until (Minister/State Secretary) Moerdiono said later that we were not getting money from them," he said.

"How can the public be calm and rational about this if they have no idea what our position is?" he asked.

State secretary Moerdiono denied Tuesday that Indonesia was seeking financial aid from the IMF, but was merely seeking technical assistance.

IMF's deputy head Stanley Fischer said yesterday he did not know the amount of the bailout package for Indonesia, but said the package of measures could be in place in a couple of weeks.

The rupiah has lost over 35 percent of its value against the U.S. dollar since speculative attacks hit the currency in early July. The government announced that it would either postpone or review US$35.6 billion worth of state-related projects to minimize the impact of the currency crisis, but analysts have said the measures are not enough.

Didik said the economy was ailing now and Moerdiono's statement only intensified the illness. The government must act as a social communicator to help ease the panic in the market, he said.

He said the newly appointed presidential economics advisor Widjojo Nitisastro could not fill this role as he was never very open with the public.

Veteran economist Widjojo was appointed by President Soeharto last week to help restore Indonesia's economy, on the same day the government announced it asked for IMF's help.

Didik said the press-shy Widjojo was a good technocrat 20 years ago when everything was kept in the dark by the government, but changes had forced the government to be more open.

"What we need is not only a technocrat, but also a 'techno- politician', because the current situation could lead to instability, not only economically but also politically," he said, adding that political action was needed to restore public trust.

President Soeharto and government officials needed to address the public on the current situation and be more open about what the country was doing to cope with it, he said.

The President also needed to call on conglomerates to help the government cope with the turmoil and to communicate with the public, he said.

Indef's chairman Faisal Basri said the problem did not lie in the volatile market anymore but in how to restore the public's trust in the government.

"The confidential crisis has been building throughout the vulnerable history of Indonesia's economy," he said, adding that the government had lost its credibility largely in 1986 when it last devalued the rupiah against the dollar.

"That afternoon we were told there would be no devaluation, but the rupiah was devalued the same night nonetheless," he said.

Indef's program director M. Nawir Messi said yesterday the institute predicted economic growth would only be 6.4 percent this year, as a result of the crisis.

The drop was less than other predictions because Indonesia's economy had grown substantially by about 7 percent in the first half of this year, Nawir said.

He said he was optimistic that there would be a slight surplus in the current account deficit, because exports grew by 9.4 percent the first half of this year, while the growth of imports only amounted to 0.7 percent during the same period.

Based on this data, Nawir said the growth of exports would reach about 8 percent by the end of the year.

However, the ill effects of the currency crisis would continue into next year, when economic growth would decline further to 6 percent, he said.

"The country has suffered the effects of the crisis in the last four months of this year, but it will not be able to recover until the second half of next year," he said.

Explanations

In a related development, the United Development Party (PPP) and Indonesian Democratic Party (PDI) factions at the House of Representatives urged the government yesterday to give a comprehensive report on the rupiah at a plenary House session.

The factions' leaders, Hamzah Haz and Bachtiar Chamsyah, said they sent a letter to the House leadership asking for a plenary session to hear government explanations about the currency's turbulence.

"The government gave a statement to the House on Sept. 16 about the currency turmoil and what measures had and would be taken to cope with the problem," Hamzah was quoted by Antara as saying.

But additional explanations were warranted because the crisis seemed to be worse than earlier estimated, as could be seen from the government's request for IMF assistance, Hamzah said.

Chairman of the PDI faction Budi Hardjono concurred that the government should brief the House on the latest monetary situation.

His faction, Hamzah said, also insisted that whatever assistance was agreed upon between the government and the IMF during negotiations should be approved by the House before it was implemented.

"We need to remind the government that foreign loans for the public sector require House approval," Hardjono said. (das/vin)