Ministers told to fix meltdown

Muninggar Sri Saraswati and Rendi A. Witular, The Jakarta Post, Jakarta

President Susilo Bambang Yudhoyono swore in six economic ministers on Wednesday, emphasizing the importance of improving the country's macroeconomic condition currently in a meltdown due to higher inflation.

"The new economic team should immediately rehabilitate the macroeconomic condition by prioritizing efforts to curb inflationary pressure in its fiscal and monetary policies to be discussed in consultation with the central bank," he said.

Susilo also urged the ministers to closely monitor and improve the distribution chain of goods as part of a move to help ease inflation.

The new ministers are Coordinating Minister for the Economy Boediono, Coordinating Minister for People's Welfare Aburizal Bakrie, Minister of Manpower and Transmigration Erman Suparno, Minister of Industry Fahmi Idris, Minister of Finance Sri Mulyani Indrawati and State Minister for National Development Planning/National Development Planning Board chairman Paskah Suzetta.

The swearing in took place two days after Susilo announced the "limited reshuffle" in Yogyakarta in a bid to boost his Cabinet's economic team performance.

Inflation accelerated to 18.4 percent between January and November, the highest in six years, after the government more than doubled fuel prices on Oct. 1 due to rising global oil prices and a plunge in the rupiah against the U.S. dollar.

To ease the problem, Bank Indonesia has aggressively raised its benchmark interest rate six times in the last six months. The central bank raised on Tuesday its rate by another 50 basis points (bps) to 12.75 percent.

Higher inflation and interest rates have contributed to a slowdown in economic growth, from 6.2 percent in this year's first quarter to 5.3 percent in the third. Higher interest rates are also likely to put a brake on the country's consumption- driven economy, as both consumer loans and credit for business expansion become more expensive.

Boediono, a former finance minister under president Megawati Soekarnoputri, will work closely with Bank Indonesia to boost efforts in stabilizing the rupiah to curb inflation.

"Part of our move to curb inflation is to maintain a stable rupiah. The strengthening of the rupiah will help reduce the cost of producing or importing goods," he said after the ceremony.

The rupiah has been hovering at over Rp 10,000 against the greenback since August before climbing back at Rp 9,825 on Wednesday over optimism that the new economic team will bring crucial changes in economic policies.

Sri Mulyani said other efforts to rectify the economic woes would include a plan to increase government spending for labor- intensive infrastructure projects.

"Infrastructure spending is expected to boost productivity in the manufacturing and agriculture sectors. However, we should also maintain the spending balance to avoid higher demand for goods that could eventually trigger inflation," she said.

Susilo's short-term instructions for the new ministers:

1. Create job opportunities.
2. Boost government spending for infrastructure projects that could help drive economic growth.
3. Reactivate the real sector through the agriculture sector.
4. Improve economic growth through investments and exports.
5. Reduce poverty level and protect the economically disadvantaged from inflation by ensuring the effectiveness of the cash assistance program.
6. Bolster efforts to revitalize agriculture, forestry and

fishery sectors as well as the small and medium businesses.
7. Improve coordination and cooperation with the central bank

in curbing inflation, strengthening the rupiah and lowering

interest rates.
8. Urge local administrations to allocate most of their

budgets for labor-intensive projects.
9. Accelerate reform in the tax regime, budget system and

financial services sector.
10. Intensify efforts to create good governance by eliminating

the high-cost economy, illegal fees and corruption.
11. Bolster efforts to combat bird flu and other transmutable diseases.