New Cabinet in for tough challenges

New Cabinet in for tough challenges

JAKARTA (JP): The new Cabinet will be confronted with five
formidable tasks that must be solved immediately to bolster the
ailing economy and ensure social stability, according to senior
economist Emil Salim.

Emil said on Tuesday that the challenges included the
completion of the current 2000 state budget and the
implementation of regional autonomy in January.

"Whoever sits in the upcoming Cabinet will face tough
challenges that must be settled immediately," he told a seminar
on economy.

Emil, a former Cabinet member under the previous
administration of authoritarian president Soeharto, is head of
the National Economic Council (DEN), charged with providing a
second opinion on economic issues to President Abdurrahman Wahid.

However, Emil's current position appears to be tenuous since
it was reported on Monday that the President is planning to
dissolve the 10-month-old DEN following strong criticism of its
performance.

The lineup of a new, smaller Cabinet is expected to be
announced by the President on Friday.

Emil said the first challenge facing the new Cabinet, would be
completion of the April-December 2000 state budget, including the
realization of the planned increase in domestic fuel prices.

The government will significantly cut fuel subsidies in
October allowing fuel prices to rise in a bid to ease pressure on
the state budget.

Fuel is a politically-sensitive commodity in the country. The
last general fuel price increase in April, 1998 sparked unrest
that became a catalyst for the riots that toppled Soeharto from
power one month later.

"The economic team must also deal with the (recent) increase
in the salary of civil servants so that it doesn't widen the
budget deficit," Emil said.

In a bid to curb corruption, the government has raised the
salaries and allowances of civil servants.

Emil said that the target for the Indonesian Bank
Restructuring Agency (IBRA), a unit under the finance ministry,
to raise Rp 18.9 trillion (US$2.28 billion) for the current
budget year would also be a tough challenge for the new finance
minister.

So far, IBRA has raised only some Rp 7.9 trillion from the
sale of assets and loan payments. The agency must still raise
another Rp 11 trillion in the remaining four months of the
current fiscal year.

The revenues from IBRA will finance half of the interest costs
of the government bonds issued to finance the government's bank
recapitalization program.

Implementation of regional autonomy will present challenges of
a different nature, requiring additional skills.

He said the regional autonomy policy would affect the
finances of the central government through the new fiscal balance
between the central and regional governments.

But decentralization will be accompanied by "institutional
problems" that must be dealt with, including how to deal with the
massive number of central government employees currently working
in the provinces, Emil explained.

The third challenge, according to Emil, for the new economic
ministers will be to prepare the 2001 state budget.

He said the government must sharpen the priorities of the next
budget because of the implementation of regional autonomy and the
government's higher debt burden.

Emil said the fourth challenge was to push the banking sector
to resume lending to the real sector following the recent
completion of the recapitalization program of the country's
largest private and state banks.

"The government must create a conducive, competitive climate
(for businesses)," he added.

He said that the fifth challenge would be to make preparations
for future talks with multilateral lending institutions and
regional and international trade groups, notably the
International Monetary Fund, the World Bank, the Consultative
Group on Indonesia, the World Trade Organization, the Asean Free
Trade Area, and the Asia Pacific Economic Cooperation.

Emil said that negotiations and discussions with those
organizations must focus on accelerating the country's economic
recovery.

Emil said future policy making processes would be different
because of the greater role of Vice President Megawati
Sukarnoputri, now charged with running the day-to-day activities
of the government.

Meanwhile Sri Adiningsih, a noted economist at the Gadjah Mada
University in Yogyakarta, warned political parties not to
pressure the President to include their candidates in the Cabinet
line-up.

"It's okay if their presence in the Cabinet is politically
unavoidable, but we just hope that political parties do not
insist on the government accepting their people in certain posts
in the next Cabinet. Let the government decide the final
composition because the government should have a professional and
solid team, particularly the economic team," she told The Jakarta
Post in Yogyakarta on Tuesday.

She acknowledged that the government faced a difficult task in
adjusting the country's economy to a new structure in accordance
with the development of regional economies, as stipulated in the
law on regional autonomy.

The adjustment process, she added, would probably take five
years.

Adiningsih said that the economic team would not be able to
work effectively if it was immediately attacked by many political
parties with harsh, emotional criticisms.

She also warned the next Cabinet's economic team to set aside
their respective political party interests and follow only the
government's agenda as set by the President and Vice President.
(rei/44)