Law on fight against graft: What about it?

Some economists believe that Indonesia's economy is likely to recover in 1999 but corporate lawyer T. Mulya Lubis sees that corruption and uncontrolled spending might hamper the rapid recovery.

JAKARTA (JP): Economics guru Sumitro Djojohadikusumo has predicted that Indonesia's economy, recently hard hit by a monetary crisis, will recover in 1999, based on the assumption that deregulatory and reform measures will be consistently implemented.

This is quite an optimistic prediction, which is also relieving. Many, however, believe that Indonesia's economic condition is grave and that two years will be too short for a full recovery.

The statements made by many government officials and economics experts that the country's economic fundamentals are strong turn out not to be fully correct. Many parts of the economic structure prove to be fragile, while loopholes are found here and there, even though the economy grew significantly in the past years.

The rupiah has sharply declined against the U.S. dollar and some parties believe that the exchange rate of Rp 3,700 per dollar is not yet its bottom line and that it might further decline to Rp 4,000 a dollar.

The rupiah's sharp depreciation has suddenly raised the amount of Indonesia's foreign debts, while the prices of many shares listed on the capital market have fallen by about 50 percent.

Such conditions have affected all sectors of the economy and forced companies to tighten their budgets even though budget tightening is already next to impossible.

Indonesia has not many options left and belt tightening is absolutely necessary. The high debt service ratio and a possible two-digit inflation rate will further deteriorate the economic condition. The government, therefore, should never impose conflicting policies.

Unfortunately, there are no evident efforts to control spending. The government, for instance, has revived some of the mega projects previously suspended under Presidential Decree No. 39/1997. The government, which has promised not to use the reform aid from the International Monetary Fund to bail out private companies' foreign debts, is also likely to use it to help private companies solve their liquidity problems.

Irrespective of whether or not the IMF and the Singapore government accept this bail-out policy, many are wondering about the direction of the government's policy on economic recovery. Just like in the case of a sick person, the problem is whether or not the "sick man" will listen to his doctor's advice and is willing to swallow the bitter pill he is prescribed.

It is true that the way out is not easy. It is just like the chicken and the egg riddle: Which should come first? To leave private circles in their liquidity troubles will have a serious impact on the economy and will force companies to dismiss workers or to go bankrupt. But if the government bails out private companies' debts, many will protest, saying that it is not fair because, in fact, priority must be given to the interests of the community at large. Besides, private companies which have pursued offshore loans, have the obligation to shoulder the risks of their own debts by themselves. It is assumed that these companies know their own business capacities and prospects and therefore make their own preparations for the repayment of their debts when they are due.

As Indonesia is about to go through difficult years, all parties should cut down on expenses with the aim of improving the competitiveness of their products. All levies that increase costs must be systematically trimmed. It will be enough to oblige businessmen and traders to pay taxes and there must no longer be price mark-ups or illegal levies in the form of bribes, contribution fees and commissions.

The government must be free from all kinds of bribery, kick- backs and corruption which have made Indonesia less attractive for foreign investments. Furthermore, tolerating corruption in Indonesia might justify foreign investors being put on trial in their own countries.

So, corruption will become a crime which has extra-territorial legal scope and this will obviously be uncomfortable to businessmen.

A recent decision reached in Paris by the Organization for Economic Cooperation and Development that its member countries will impose criminal penalties against corruption committed outside their respective territories will obviously pose as a constraint to the development of their businesses in many developing countries, including Indonesia. Such a decision must also be noted as a very important and strategic decision for the economic future of all countries.

The eradication of corruption, therefore, is very important for Indonesia to help accelerate the recovery of its economy from the current crisis.

Legally speaking, Indonesia already has Law No. 3/1971 on the eradication of corruption, which gives a broad definition of corruption. In addition, in various legal products, including the Criminal Code (KUHP), there are articles on deeds such as bribery. There is also jurisprudence, which may be used as a reference. In short, Indonesia has adequate equipment to fight against corruption.

It is high time that the government made concerted efforts to enforce the law on the eradication of corruption.