Mega achieves little economic progress say expert

A'an Suryana, The Jakarta Post, Jakarta

President Megawati Soekarnoputri has failed to quicken the pace of economic recovery during her first year in power, despite a more stable domestic political situation, economists said on Monday.

They said that although macroeconomic indicators had generally improved during the first half of this year, crucial economic programs such as privatization and the sale of assets under the Indonesian Bank Restructuring Agency (IBRA) continued to be in trouble. The performance of exports and foreign direct investment (FDI) were also a big disappointment.

"Megawati had a chance when she assumed power last year. However, she has failed to take advantage of the strong support given by the people and investors to improve the economy," said Pande Radja Silalahi, an economist at the Centre for Strategic and International Studies (CSIS).

Megawati, the daughter of the country's first president, Soekarno, took office on July 23, 2001. At the time, Megawati was very popular among the public, raising high hopes that she could expedite the recovery of the country's economy, which contracted by nearly 14 percent in 1998.

But many economists say Megawati has failed to turn the positive momentum to benefit the economy because she lacks the courage to take difficult economic policies swiftly. She has also failed to curb corruption and improve the country's legal system.

"Megawati has no vision and leadership. She also has no sense of urgency and does not know which policy she should prioritize to spur economic growth," said Didik J. Rachbini, an economist at the Institute for Development, Economics and Finance (Indef).

One prominent example is the case of resolving the huge debts that former bank owners owe the government. Although there was strong pressure from the public, Megawati did not take decisive action to force delinquent debtors to pay up.

The macroeconomic economic picture, however, has been improving during Megawati's leadership. In April, the rupiah managed to strengthen to a nine-month high of around Rp 8,500 per U.S. dollar, although it has started to weaken to around Rp 9,000 lately amid high demand from the corporate sector to repay foreign debts. Inflationary pressure is also easing, allowing the central bank to lower the domestic interest rate environment.

But exports and FDI are declining.

Exports tumbled to US$22.285 billion between January and May this year from $24.503 billion in the same period last year.

FDI approvals plunged by 59 percent to $1.67 billion in the January to May period, from $3.98 billion posted during the same period last year.

"Indonesia's export figures have fallen sharply, but Megawati remains silent," said Pande.

"Macroeconomic indicators are progressing, but not as high as people have expected," said economist Raden Pardede.

Some, however, are still hoping Megawati can quickly improve her leadership, particularly with regards to the economy.

Didik said that to accelerate economic recovery, Megawati must have the courage to take difficult economic policies.

"Legal reform and combating corruption must also become a top priority to accelerate economy recovery," said Raden.