New cabinet members sending mixed messages

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.