'Govt must be open on effects of crisis'

'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)