Govt urged to redefine its roles in economy
Govt urged to redefine its roles in economy
JAKARTA (JP): Following the worse crisis in three decades, the
government's role in the country's economy should now be
redefined, economists have suggested.
Muhammad Chatib Bisri, a doctoral candidate at the Australian
National University, said here yesterday that the government
should now act as an institution which facilitates the smooth
operation of market mechanisms.
"The government should no longer intervene directly in the
market to achieve economic targets," Chatib told a seminar hosted
by the Center for Strategic and International Studies (CSIS).
Instead it should pursue it's objectives by maintaining
macroeconomic stability and providing sound physical and
institutional infrastructures.
The government should work to ensure that market mechanisms
function correctly and its primary aim should be to reduce
transaction costs arising from incomplete or incorrect
information.
The government must no longer pursue policies to its own
benefit which contradict the principles of free market economics.
In the past, Chatib said, the government devised policies to
please its own constituents and thereby defend and maintain its
existence.
This misuse of power resulted in a massive outflow of capital
when the government's position of unchallenged strength was
threatened.
"The government should now develop policies to support market
forces and no longer use them as a instrument with which to
compete with the market," Chatib said.
Chatib argued that the crisis had frightened most private
capital out of the country meaning that there was no longer a
need for the government to impose capital controls, as some
experts have suggested.
He contended that capital controls would be counter-productive
because they would discourage the inflows of capital which are so
badly needed to revive the economy.
"Moreover, capital controls would create another problem in
terms of policy consistency," Chatib said.
CSIS executive director Mari E. Pangestu shared Chatib's view
and said that the government should think beyond its own term in
office when developing economic policies.
Economic policies should be consistent, no matter what is
happening on the political front.
She argued that the government had been particularly
inconsistent and created a large number of market distortions in
the last five years of former president Soeharto's term in
office.
These distortions have created numerous problems in the
country's economy and have led some experts to conclude that the
government's role in the economy should be trimmed back to the
bare minimum.
Mari contended, however, that the government would still need
to play an important role in terms of trade liberalization,
privatization and creating prices and incentives based on fair
competition.
The government, Mari said, should no longer give sole priority
to economic growth but should place a stronger emphasis on
improving the quality of people's lives, work to lay the
foundations for sustainable, fair and equatable development, and
strive to uphold democratic values. (rid)