Kwik calls for unilateral moratorium on debts
The Jakarta Post, Malang, East Java
State Minister of National Development Planning Kwik Kian Gie continued his attacks on the International Monetary Fund and lambasted other multilateral and sovereign creditors for what he called collaboration to plunge Indonesia into a debt trap.
Kwik accused the international creditors of nurturing a borrowing culture within the Indonesian government and ganging up to make "us a beggar nation that is now being forced to sell our assets at throw-away prices".
"It is high time that we stand up and say enough is enough and unilaterally declare a moratorium on our foreign debts even at the risk of being isolated by international creditors," Kwik said in a paper distributed at the 15th congress of the Indonesian Economists Association.
Kwik was scheduled to deliver a speech during a lunch session at the conference on Tuesday, but he was on an overseas visit.
"The government is now flat broke with over US$75 billion in foreign debts and Rp 600 trillion in domestic debts. It is now unable to adequately provide public services and has to succumb to policies dictated by international creditors."
He reiterated his demand that Indonesia totally disengage itself from any arrangement with the IMF so that the government can act as a truly sovereign entity that is responsible for cleaning up its own house.
"We should have the courage to regain our national dignity even at the risk of being isolated by international creditors. After all, the majority of our people in the rural areas do not gain any benefit from foreign capital and remain untouched by the globalization process."
Kwik blamed much of the economic debacle Indonesia is now mired in on the erroneous policies international creditors and the IMF have dictated to the government.
"International creditors should bear part of the losses caused by our default because, like banks, they should have assessed Indonesia's debt-servicing ability before approving their loans".
He said the World Bank and IMF always preach that banks should make adequate provisions for their loans and write off bad credits. "Why don't they treat Indonesia like that."
Rizal Ramli, former chief economics minister, another leader of the camp staunchly opposed to a renewal of the IMF program in Indonesia, reiterated his arguments on Monday as to why Indonesia should totally disengage from any IMF arrangement later this year.
Rizal told the congress session on Indonesian strategy after exiting the IMF arrangement, that the success rate of the IMF programs had so far been very low or only around 30 percent and even this poor record had been made mostly in small countries in their early stages of development.
"Indonesia does have internal weaknesses of its own. But the IMF policy blunders have been responsible for aggravating these weaknesses and plunging Indonesia into a graver economic crisis," he pointed out.
Rizal said the macroeconomic stability was driven mainly by external factors such as the weakening dollar and the steady decline in American interest rates.
"The strengthening rupiah, declining inflation and interest rates are only intermediate targets that do not mean much without the creation of jobs. This financial stability is meaningless if the unemployment rate remains very high as it is now."
According to him, what is really needed is a strong export expansion, higher capacity utilization within the manufacturing industry and a more vigorous investment climate.
"All this should be the focus of debates about Indonesia's strategy regarding the termination of the current IMF program. The real issue is not about what kind of IMF arrangement Indonesia should enter into after the program ends later this year," he asserted.
If Indonesia remains under IMF supervision, its growth will languish at around 4 percent, far from sufficient to absorb the huge pool of the unemployed and new job seekers, he said.
"However, if we become the boss of our own policy-making and implementation, we can accelerate the growth to at least 6 percent by stepping up structural measures in tax administration, better fiscal and domestic debt management and optimization of revenue from natural gas,"
Rizal hastily added, however, that all these measures depend on a number of preconditions, especially strong national leadership, security, political stability, secure property rights and effective rule of law.
But while almost all the structural measures he proposed have been stipulated in the government's reform program with the IMF, Rizal failed to explain how the termination of the relationship with the IMF would contribute to the acceleration of the reforms.
He could not explain either how total disengagement from the IMF program would create the preconditions needed for the success of the policy recommendations, which he suggested as an alternative course to the IMF program.
The low credibility of the government's policy-making and implementing capacity has been the main concern of those who have suggested that Indonesia only gradually disengage itself from the IMF.
Supporters of continuing IMF supervision of Indonesia's reform program, at least until the election of a new government later next year, have argued that it is unwise to take the risk of rocking the "boat of market confidence", especially in view of the risks of political turbulence during the 2004 election year.