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)