Tue, 09 May 2000

Healthy climate essential to economic recovery

Economist Sri Mulyani Indrawati, a member of the National Economic Council (DEN), talked to The Jakarta Post about obstacles hampering the country's economic recovery.

Question: How do you view the economic recovery process?

Answer: Generally, the framework is understood. The more difficult problem is how to create a climate and supporting institutions to accelerate the framework.

A good climate is necessary. This includes politics and the government's attention, starting from the President, Cabinet ministers and officials of local administrations.

The institution should include values and a game plan, for everyone, not only for formal organizations or bodies.

Q: On what basis does the process work?

A: It works eventually with the democratization process which requires better and higher participation, transparency and accountability.

Unfortunately, many officials are neither ready for this change nor realize the new realities. They often are shocked and even worse. Some of them may still think that they can ask others in public institutions to support their own hidden agendas. They don't care that good governance is the name of the game in this postcrisis era.

Q: What does DEN propose?

A: Much. We can't give the details. Trickiest of all, perhaps, is how to communicate our proposals to the President and that he will pay attention to them, making them a priority in his decisions.

Q: How do you rate DEN's progress?

A: I would define progress from the point of organizational aspects in that we continue to meet weekly. We also will continue to develop the economic framework. This will be finalized soon and made known to the public. Some of the policies are for the medium and long terms, including studies on policies which will be formed soon, the implementation of autonomy and its problems, the fuel subsidy and state credit program.

DEN is focusing on the medium and long term as well as structural problems, while the assisting team is acting like the firefighters, focusing mainly on the letter of intent (LoI) with the International Monetary Fund (IMF).

Q: Can Indonesia meet the targets with the IMF in fulfilling all the reform measures stipulated in the LoI?

A: Yes, if we are talking about quantitative targets, which include growth, inflation, monetary quantity, net reserves and the current account surplus. I believe Indonesia can also meet the targeted deadline for amending regulations and recapitalization.

If the target is about quality, meaning institutional change and attitudes for better governance, I think we will need a longer period. We still need to fight various groups with vested interests. So, the answer greatly depends on how we interpret the target.

Q: Are you satisfied with what DEN has done?

A: More or less, it's hard to say that it has already fulfilled my hopes. Internally, DEN is quite focused and effective but regarding our client, the President and the government, I think they frequently leave us confused. They are not focused. Political affairs, I think, remain the priority of the President.

His response concerning economic problems has been limited to actions to set up various institutions, appointing and assigning several people there. This has raised questions about advisers to the President, and whether the assigned people can work effectively and will not confuse him even more.

DEN has taken the initiative to communicate with other parties with similar functions, at least to inform them that DEN has a program. Sometimes, affiliated ministers have asked us to meet. So, if everyone is sincere and has goodwill, problems among presidential advisory bodies can be handled.

Q: How is cooperation among economic ministers?

A: I cannot answer that, it's not ethical to meddle in their work mechanism. We can see the cooperation and togetherness among them from their output, both in the substance of the policies which should be supporting and strengthening each other and in the implementation of the policies which should be methodical and adequately received by the public.

Q: Foreign investors remain reluctant to invest in Indonesia and are maintaining a wait-and-see attitude ...

A: No wonder. The government has yet to become solid, as the frequent political changes attest. The recent Cabinet reshuffle and the general assembly in August have raised many technical questions.

There are numerous cases involving major companies like Indorayon, Newmont and Freeport which have yet to be completely resolved. We don't see and understand yet a firm position from the government. What the public wants is also unclear. Cases of failed bankruptcy petitions give the impression that the government is not really in full control of the process of decision making and implementing. It has left investors in doubt.

Q: Standard & Poor's recently downgraded its foreign currency issuer credit rating on Indonesia. Do you think it was related to the President's attitude toward his administration?

A: I don't think so. Check the clarification from the central bank, Bank Indonesia, about this. (I. Christianto)