Govt urged to improve credibility
Govt urged to improve credibility
JAKARTA (JP): World Bank country director for Indonesia Dennis
de Tray urged the government and private sectors again yesterday
to provide credible information to help restore public confidence
in the country's economy.
Speaking at a seminar on Indonesia's macro economy, De Tray
said the government needed to issue a strong and quick sign of
its implementation of reform measures to cope with the currency
turmoil.
"The signal should constitute more actions than promises," he
said.
De Tray also stressed the importance of the government to
clearly accept the ongoing monetary crisis and recognize models
for change to restore market confidence.
"Neither the government nor private sector has the credibility
in delivering the information to domestic and international
investors," he said.
The seminar titled, "The Prospects of Mutual Funds Today and
Tomorrow", was organized by the Institute for Economic and
Financial Research (ECFIN).
"The government has to deal with the crisis in a highly
efficient way by using models of global rules," he said.
De Tray said the government should also recognize a model of
change in the cultural system, legal system, infrastructure and
financial institutions in Indonesia to meet global business
practices.
"And there should be a mechanism to make such changes," he
said.
He said Indonesia's monetary crisis, unlike Thailand's, was
largely driven by domestic factors rather than by overseas
factors.
Indonesia has been the hardest hit by the regional financial
crisis which broke out following the Thai baht's devaluation in
July this year.
The rupiah, for example, fell to a historic low of 5,800
against the U.S. dollar yesterday, down by about 56 percent since
July this year before easing to a close of 5,750 yesterday.
The main price index on the Jakarta Stock Exchange (JSX)
closed at a four-year low at 339.53 points yesterday, down 118
percent from its highest record of 740.93 points on July 7 this
year.
Bailout
In mid-October, the Indonesian government asked the
International Monetary Fund (IMF), the World Bank and the Asian
Development Bank for help and received a US$23 billion bailout
financial package. Other bilateral agreements were also made
available to supplement the financial package.
The government has taken several financial reform measures
since November, including the closure of 16 banks.
De Tray believed Indonesia would be able to come out of the
monetary crisis if it stuck to the short- and long-term measures
in dealing with the monetary crisis.
He said the government should also be willing to undertake
necessary financial, cultural and infrastructure changes to
ensure a smooth transition.
Executive director of the Centre for Strategic and
International Studies (CSIS) Mari E. Pangestu shared De Tray's
view, saying that the monetary crisis stemmed from the lack of
confidence in the market.
She questioned the decision to seek the IMF financial bailout
package as the best way to resolve the crisis.
"I think the monetary crisis Indonesia is now facing is a
leadership crisis instead," she said.
"Indonesia's macroeconomic policy is okay, but I doubt the IMF
package is the proper solution," she said. (aly/rid)