'Only change of govt' will solve the crisis

JAKARTA (JP): A complete change in government is the only way to put the Indonesian economy on the road to recovery from its worst crisis in three decades, economist Rizal Ramli said yesterday.

The director of the Econit think tank argued that President B.J. Habibie's government was thwarted by a lack of credibility which undermined all its efforts to prevent the country from sinking into a deeper crisis.

The market still did not have confidence in the current government because it was considered merely a continuation of former president Soeharto's New Order administration, he added.

Habibie was Soeharto's choice, and many members of the present economic team were also legacies from Soeharto's final, short- lived development cabinet.

"To restore market confidence, I support the idea of replacing Mr. Habibie as soon as possible with a new leader with credibility and trust from the people," Rizal told a convention of the Indonesian Economists Association (ISEI).

Private investors will shun Indonesia until Habibie and his government were replaced, he believed.

"As long as private capital remains negative, any strengthening of the rupiah would be temporary because private capital has been the engine of our economic growth."

Although he agreed that Habibie had been entitled to a chance to prove himself in handling the crisis, he said his time was already up.

"Okay, give Habibie a chance. But we don't need six months to evaluate Habibie's performance. Two months are enough to see if the man has the capability to restore (the economy) from the crisis."

From Habibie's record during his three months in office, he said it could be inferred that he was incapable of navigating the country through the waves of the crisis.

He listed several failures including the fact that Habibie's administration was unable to stop the rise in prices of basic commodities, with the cost of rice, cooking oil and sugar skyrocketing.

He said the government was erroneously pursuing populist policies by generously distributing subsidies to various sectors, measures which would ultimately backfire by resulting in higher inflation.

The government's tight monetary policy also proved ineffective in arresting the fall of the rupiah against the U.S. dollar. On the other hand, high interest rates punished corporations in the real sector.

He added that the government had offered no explicit policies on how to boost exports in the crisis.

Most importantly, he said, the government was not serious in uprooting corruption, collusion and nepotism because not one major corruptor had been prosecuted.

Rizal said if the country followed Habibie's timetable, the economy could sink further, and it would take about eight years to recover to pre-crisis development levels.

Meanwhile, ISEI said in a statement that there was no indication the economy would recover in the near future.

The country's economic crisis was worsened by political infighting, rampant violations of the law and human rights and the social gap between the rich and poor.

Terming it an "economic, political, legal, human rights and social crisis", the group said it stemmed from a crisis of confidence and leadership.

"This leadership crisis has made the direction and design of policies blurred and confused people because good governance and good corporate governance are not yet practiced optimally," ISEI chairman Marzuki Usman said.

Marzuki, also minister of tourism, arts and culture, said the direction of economic policies in the future should be focus on the allocation of economic resources fairly and optimally.

Future economic policies should also support an efficient market mechanism with fair competition, he said. (rid)