Govt seeks options for dealing with global recession

Berni K Moestafa, The Jakarta Post, Jakarta

After repeated calls for an emergency package to cope with a global recession, the government promised on Tuesday it would seek input on how to best safeguard the country's flagging economy.

Coordinating Minister for the Economy Dorodjatun Kuntjoro- Jakti said he would hold a national brainstorming to assess developments in the global economy.

For this purpose, he said, the government would gather input from local and international think tanks.

"We will collect the studies; we've been promised studies from the IMF (the International Monetary Fund), the World Bank, America, Japan, and the Asian Development Bank (ADB)," Dorodjatun was quoted as saying by Detik.com.

"I have also contacted local think tanks," he said, citing the University of Indonesia's Institute for Economics and Social Research (LPEM), the Centre for Strategic and International Studies (CSIS), and the Danareksa Research Institute.

He hoped the government could draw up a solution prior to the meeting of the Consultative Group on Indonesia (CGI) on Nov, 7.

The CGI, grouping Indonesia's main donor countries, will discuss the country's loan requirements for next year's budget.

Ownership of an emergency plan for the global recession will come in handy as the government seeks more loans from the group.

Last month's terrorist attacks against the U.S. have pushed the world to the brink of recession.

The attacks sent U.S consumer and business confidence into a nosedive, a phenomenon that is hitting economies worldwide.

Dorodjatun estimated the recession to last until the second quarter of next year. He warned that worse was yet to come.

"I expect freight costs to surge, especially after I was told by the State Minister of Tourism and Culture (I Gede Ardika) that the global travel industry has plunged by 30 percent," he said.

"At present there are too many uncertainties; by next week we'll have more information based on the studies I expect to receive," he added.

In another effort to adjust to the changes, legislators have approved the government's proposed revision of assumptions used for the 2002 state budget.

Meanwhile, calls have grown stronger for an emergency package that experts said should ease the impact of a global recession.

Trade organizations urged higher import tariffs to protect domestic industries, lower interest rates to reduce the cost of investment and better security and legal certainties.

Economist Raden Pardede of PT Danareksa Securities has cited security, legal and political stability as preconditions for any emergency package to work properly.

"When people feel uncertain about the future, they prefer to hold cash, meaning that money in circulation increases. For this, Bank Indonesia has kept its interest rates high," he explained.

He added that a fiscal stimulus under this and next year's tight budget was unlikely, unless revenue targets were raised.

Better tax collection, privatization, asset sales, and the raising of foreign loans were among the best ways to boost revenue, he said.

But asset sales and privatization, he said, were sensitive issues as they often concerned national pride.

"If we want a stimulus, there is a price to pay, like paying interest on new loans or losing ownership of assets," he said.