New cabinet members sending mixed messages

New cabinet members have started rolling up their sleeves for the battle ahead of them, but economist Kwik Kian Gie finds confusing signals in their opening salvos.

JAKARTA (JP): Former cabinet member Frans Seda was right when he said we should develop a sense of crisis and urgency in facing our economic woes, which could evolve into a long-term economic depression.

Accompanying the monetary meltdown, the country is also confronting various critical factors, including overdependence on foreign debts, poor performance of banks and severely weak structures of conglomerates.

Indonesia also finds itself in a crisis of confidence internationally, with its country risk rating now set at the lowest level of triple C. Its letters of credits (L/C) are denied even though they are issued by foreign bank representatives in the country.

Public trust in the government is low. The people are afraid the government will block deposits in banks and convert them into bonds. Many have opted to deposit their money in Singapore at an interest rate of only 10.5 percent per annum.

The public hopes the government will introduce comprehensive measures, followed by quick, transparent, concrete and firm actions.

Unfortunately, some new cabinet members have made confusing statements.

Vice President B.J. Habibie, for instance, said before he left for Tokyo last week that 10 of the 50 points in the International Monetary Fund-sponsored reform package were problematic. He said two of them -- the abolition of the clove trade monopoly and the dismantling of the State Logistics Agency's monopolistic practices -- could not be implemented.

While in Tokyo, however, he said all 50 points could be implemented but only slowly, because part of them was contradictory to the 1945 Constitution.

Does this mean that the problematic issues are rendered moot when implementation is slow?

Habibie also said the rupiah's value would be pegged to a basket of currencies. Without further explaining the concept, Habibie added that Japan was offering help.

But how exactly will Japan assist? Will it provide loans to meet all the demands for foreign currencies?

Furthermore, Bank Indonesia Governor Sjahril Sabirin said he was considering ways to gradually lower the dollar's value to Rp 9,000, Rp 8,000, Rp 7,000 and so on. But he did not mention any time frame or about the possibility of a run on dollars.

Then, Minister of Trade and Industry Mohamad "Bob" Hasan stated that monopolies were good as long as they were based on the interest of the people in general.

This is all very confusing. After all, would a monopoly held by a profit-oriented private company be useful to the people?

Equally perplexing was his statement that foreign criticism actually showed Indonesia's greatness because it reflected envy at the country's progress. Strange, indeed, considering the nation's turmoil.

Many have also been confused by a government appeal for able citizens to donate basic salaries, with Minister of Social Services Siti Hardijanti Rukmana assigned to manage the funds for subsidies to small food stalls. Yet the task of the government is to manage the state and all its people, not to coordinate philanthropic activities with limited public outreach.

How, then, should the cabinet conceptualize its policy to overcome the crisis?

President Soeharto in his speech on March 1 said the key was stabilizing the rupiah's value at a normal level. Most parties agree that Rp 5,000 per U.S. dollar is reasonable. This is crucially important for the survival of factories, which largely depend on imports of raw and auxiliary materials.

Thus, the top priority is pegging the dollar at Rp 5,000. Since we have inadequate foreign exchange reserves to support this exchange rate, we must make an all-out effort to find them. Given the sympathy expressed by the international community over the country's plight, it should not be hard to find help to increase reserves.

But if we do encounter difficulties, then this must indicate something wrong in international confidence in the Indonesian leadership.

All ministers, therefore, should concentrate their activities on implementing the IMF reform package despite any problems. We need the IMF's funds, even though they will be disbursed in piecemeal fashion.

The trade and industry minister should formulate a concept to make Indonesian factories less dependent on imports, and the social affairs minister should introduce concepts related to the management of the country.

For its short-term program, the latter minister can coordinate the implementation of labor-intensive and other development projects aimed at reducing the impact of the economic crisis. For the long run, the minister should create a better and more adequate system for social insurance.

The dreaded result if we fail to fully implement the reforms is that poverty would cast a pall over the country, and for a long period of time.