Govt urged to send signals to restore public confidence

Govt urged to send signals to restore public confidence

JAKARTA (JP): The World Bank country director for Indonesia,
Dennis de Tray, suggested yesterday that the government send
signals to the market that it would undertake reform measures to
restore public confidence.

De Tray said he was optimistic the country's monetary crisis
would ease shortly provided the government stuck to its promised
reform programs.

Once the government sent strong, clear signals to the market
that they would undertake reform measures, the situation should
ease, he said.

"In the medium-term, there is great hope for optimism. But we
need to get through the short-term and we need to do that
quickly," de Tray said at a business luncheon hosted by the
Indonesia-Australia Business Council.

"It needs to signal to the people and to the world in a
transparent way.

"I think the signal that the market is sending is that the
government should implement a broad package. This is very
important to restore domestic confidence," he said.

Unlike Thailand, de Tray said, Indonesia's monetary crisis was
very much driven by domestic forces rather than by offshore
players.

Indonesia has been badly hurt by the regional financial crisis
which broke out following the devaluation of the Thai baht in
early July.

The Indonesian rupiah fell to a historic low of 4,600 against
the U.S. dollar Tuesday, down over 50 percent since the beginning
of the year, and the stock market index traded last week at a
four-year low.

Indonesia asked the International Monetary Fund, the World
Bank and the Asian Development Bank for help in October and
received a bail-out package of US$23 billion. Bilateral
agreements also were made to supplement the package.

De Tray said the government should now move from its short-
term measures to long-term ones by addressing all problems
outside the finance sector, including the public sector, to
satisfy market expectations.

"The interest rate route is very good, but it is short term.
It needs to be accompanied by long-term reforms outside the
finance sector," he said.

If the government blended its short-term measures with long-
term ones correctly, de Tray said he was confident that Indonesia
would come out of the crisis very soon.

"There is a very strong sense that this is a short-term
financial crisis that needs to work its way out of the system,"
de Tray said.

"After that, there is every reason to believe that Indonesia
can return to high growth, substantial foreign investment and a
real increase in the incomes of the Indonesian people," he said.

De Tray said the government needed to take very transparent
decisions in terms of public resources spending, including in
financing foreign exchange-consuming strategic industries.

He warned that Indonesia needed to be very careful in moving
toward high capital and high technology costs as it had proved to
be dangerous in the past in many other developing countries.

"We argue that state-owned enterprises, including strategic
industries, need a very good handle. So when they make a decision
on them, they should do it very transparently, so there's no
second guessing," he told journalists after the luncheon.

"And the public has the right to know what the future is," he
said. (rid)