Lost of creditworthiness could spell disaster: Economist

JAKARTA (JP): Sound economic policies are now more crucial than ever for managing and benefiting from the rapid movement of global capital, economist Mari E. Pangestu said yesterday.

"Creditworthiness is very important in respect to private capital flows, which constantly fluctuate," Mari told a seminar on economic globalization and the likely challenges countries will face.

Mari was one of three commentators on Ali Wardhana's presentation at the seminar which discussed the importance of maintaining a sound macro-economic policy for economic stability.

Mari noted that the loss of creditworthiness could be a disaster for indebted countries like Indonesia because this might not just stop capital inflow, but also could set off capital outflow.

She said Mexico's financial crisis earlier this year, which was sparked by the devaluation of the Mexican peso against the U.S. greenback, underlines the importance of creditworthiness to an indebted country.

To maintain international trust in Indonesia's economic management, the country should always get its policies right, Mari said.

Indonesia also be prepared for the increasing globalization of the services market, the head of the economics department of the Center for Strategic and International Studies (CSIS), said.

Mari cited much keener market competition and new international norms of doing business transactions as some of the major challenges Indonesia is facing as a result of economic globalization.

Closer attention

In support of Mari's suggestion, Dorodjatun Kuntjoro-Jakti, the dean of the Jakarta School of Economics of the University of Indonesia, charted out the global trends in economic development to which the government needs to pay closer attention.

The global trends include the increasing role of the private sector in the global economy and the increasing public pressure to privatize state enterprises.

Trends also indicate the need to standardize certain laws among countries to facilitate smoother flows of goods and services and the need to implement the provisions of multilateral agreements such as those of the World Trade Organization to ensure more orderly international trade in goods and services.

Thai economist Narongchai Akrasanee noted during the discussion that the advancement in the world economy has been supported by technological enhancement, especially in the transportation, telecommunication and computation sectors, as well as economic liberalization.

Although the economy worldwide tends to be globalized, the politics of countries tends to be nationalistic and inward- looking, Narongchai, Chairman of General Finance & Securities Public Company Ltd., added.

And although economic globalization encourages greater mobility of people and the integration of economic activities across countries, Narongchai said, "politics defines borders, nationality and limits the movement of the people."

Therefore, he said, regional economic groupings such as ASEAN and APEC should be enhanced to serve as a way of minimizing political resistance to economic globalization. (rid)