'Krismon' in slow motion

By the time our readers read this editorial, the government, following its Tuesday night Cabinet meetings, should have announced its latest policy package aimed at rescuing the ailing rupiah.

Given the situation that has evolved over the past several weeks, this package will need to be bold, insightful and nothing short of a miracle, for it to have an immediate impact upon the sinking currency.

We are nevertheless hopeful that what ever policy decisions are announced that the package will produce a firm foundation towards a medium-term recovery.

Given the gravity of the situation even a weak policy response is better than no policy response.

The present predicament reminds us very much of the events of mid-1997 that led to krismon -- an Indonesian abbreviation for Krisis Moneter, or monetary crisis -- which resulted in the meltdown of the Indonesian economy and eventually led to massive political upheaval.

Both situations were permeated with unfavorable external conditions that were beyond the control of domestic forces. In 1997, it started with the free fall of the Thai baht; in 2005, it is high oil prices. It was, and is, exacerbated by local conditions and a government that seems impotent to stem the tide of global challenges.

During the initial phase of krismon, Indonesian policymakers repeatedly insisted that the fundamentals of the economy were sound. Only after it was too late did we realize the hollowness of their remarks.

Over the past fortnight government officials have been busy scampering about from one meeting to another, making one announcement after the other, but with little apparent success in boosting the economic situation. Time will tell if history repeats itself.

While the economists may debate technical remedies, what is most worrying to us are the similarities in the socio-political environment of mid-1997 and mid-2005, in particular a growing distrust in the government's ability to meet economic challenges.

The difference in nuance was that eight years ago it was further fueled by deep-rooted political discontent.

Irrespective of the external economic conditions, when the rupiah drops 1,000 points in a matter of days to hit a four-year low, it is obviously a sign of panic.

Combined with the perceived inability to provide a sustained supply of staples, such as gasoline and electricity, mediocre welfare management, the escalating panic could be a harbinger for a crisis in the making.

Though the impact of events in the global economy are unavoidable, the government could have undertaken preventive measures to avoid putting Indonesia in such a vulnerable position.

When Indonesia completed its presidential elections in late 2004 the country was in an elated mood, and this optimism carried through into the following year.

Gradually however, the economic indicators began showing signs of rumbling discontent brought about by a lack of concrete measures to build a sound economy.

Four months into the year, inflation was rising, exports were going down, public consumption was showing signs of stagnating, while unemployment went on unabated.

The rise in gasoline prices at petrol pumps, albeit necessary, was not accompanied by appropriate welfare programs that would have alleviated some of the burden on those hardest hit.

The government had a golden opportunity to inject some confidence into the economy in mid-August when it unveiled its draft budget. However, the draft was universally criticized for being unrealistic.

All the while the President Susilo Bambang Yudhoyono has continued with the platitudes that have now become rather stale, if not a tad boring. The situation is not helped by the lack of any significant economic achievements that the President can point to in his first year in power.

Everything the President has done so far has turned out to be a dud. The infrastructure summit was one such undertaking which failed to give even mildly positive indications that it would usher in significant investment.

Despite his very presidential public persona, we must remind the President that leadership is action, not just position. The nation needs clear leadership now, Susilo!

The implementation of new economic initiatives does not necessarily have to be audacious, as long as it is thorough with clear timelines and proof of its progress.

Simple, straight-forward priorities that everyone can focus their hopes on.

A Cabinet shake-up may or may not be necessary to improve market confidence, but what must not happen is a reshuffle just for the sake of appeasing political forces who are exploiting the President's weakened bargaining power. Horse-trading for Cabinet seats will satisfy certain political parties, but it won't help the economy.

We do not wish to see a repetition of the glum disappointment that prevailed when Susilo initially unveiled his Cabinet last year. Controversy can be overcome, as long as the changes are incisive.

This nation has come too far to again undergo the ordeal of 1997/8. We wary that without leadership and strong policy action, all that's left to be said is "here we go again".