IMF has outlived its purpose: Kwik
The Jakarta Post, Jakarta
Outspoken State Minister for National Development Planning Kwik Kian Gie questioned again the International Monetary Fund's (IMF) presence in Indonesia, saying the fund had outlived its purpose here.
Kwik said the IMF's purpose of providing Indonesia with funds to serve as a second line of defense against currency speculators had become obsolete.
"In fact, BI's (Bank Indonesia) foreign exchange reserves have been rising," Kwik told reporters on Wednesday.
He expressed doubts that the IMF's presence was bolstering foreign investors confidence, pointing to Indonesia's continued poor investment climate. "So what is the IMF here for?" he asked.
Indonesia, almost exactly five years ago, decided to call in the IMF over fear it lacked the reserves to fend off an onslaught against the rupiah.
Kwik was among the first to call for the IMF and had said that their reform program was "just what Indonesia needed."
Under the IMF led reforms, Indonesia moved to scrap monopolies and allow market forces to gain greater control over the economy. The reforms also spurred the divestment of state enterprises, a policy that has drawn the most criticism against the IMF.
But in 1998 the drive for reforms spilled over to the political front and led to the downfall of then president Soeharto at the cost of political and security instability.
And while neighboring countries slowly recovered from the economic crisis and have cut loose the IMF, Indonesia's economy has hardly improved.
Kwik's statement on Wednesday marked the second time he questioned the IMF, after the government signed a contract extension last June with the Fund that will last until the end of 2003.
Analysts however said the IMF became important in pushing the reforms program rather than in protecting the rupiah.
"I think this kind of pressure is good, otherwise the government would hardly move on reforms," economist Chatib Basri has said of the leverage foreign lenders like the IMF and the World Bank had over the government.
On the macroeconomic front, though, progress has been minimal.
Bank Indonesia's quarterly report on Tuesday raised doubts over the government 4 percent economic growth target due to slowing consumption growth and sluggish export sales.
Economists have said Indonesia needed at least 5 percent to 6 percent growth in its economy to cut unemployment and poverty.
Indonesia's economy grew by 4.8 percent in 2000 mainly because of domestic consumption, but slowed to 3.5 percent last year and may not meet the targeted 4 percent this year, according to the central bank.
The two other growth engines exports and investment remain weak. A pick up in export sales toward the end of the year is seen as unlikely with Indonesia's biggest export market, the U.S. still in the doldrums.
Investments have been slow since the 1997 economic crisis amid a weak banking system and companies burdened with debt. Meanwhile the country's poor investment climate keeps foreign investors away.