Open letter to Mr. Camdessus

When you gave your media conference in Jakarta on Jan. 15, you expressed great elation and satisfaction with the letter of intent submitted by our government. Attaching great importance to the document, it was signed beyond normal international usage by no less than the President of our country.

Official clarifications and media releases gave the impression that the agreement's 50 points were jointly drafted and mutually agreed upon by our government and the IMF, so that the public understood the document to be a joint agreement. If one reads the text, however, it does not seem to be so.

The signing of the agreement was followed up by the usual bandwagon of enthusiastic support by the establishment comprising members of the House of Representatives, business CEOs and the economic community in particular.

If one examines the agreement's 50 points more closely, however, one would be immediately struck by their lack of coherence. They are a far cry from being one integrated entity. Neither does they convey any picture of an economic or monetary policy in terms of a series of properly coordinated measures and instruments aimed at the pursuit of clearly defined aims. The agreement leads us nowhere with respect to the use of the package's US$43 billion loan and the envisaged reform of our financial system. The very few concrete actions in the industrial sector are like drops in the ocean. They do not represent elements of a scheme for the restructure of industries.

For 1998, the agreement seems to provide certain items from out of the blue: In quantitative terms, a zero rate of growth for the economy is to be accompanied by a 20 percent inflation. An exchange rate of Rp 5,000 to the dollar was also foreseen. No clues whatever were provided as to how these targets were to be arrived at. No quantitative estimates were given concerning business failures and shutdowns which in turn would add to the ranks of the already huge army of the unemployed.

The projected high rate of inflation would no doubt substantially reduce the income of the work force and civil servants who, for the last decade, have been paid an extremely low salary. Again, the cascading price increases would badly cut overall consumer demand and would create a fall in output. All these downturns would be happening not due to faulty business practices or recessionary tendencies from abroad, but solely from the faulty exchange rate of the rupiah.

All in all, the letter of intent is nothing but verbiage reflecting "the death of economics" in Indonesia. (This term was aptly suggested to me after having attended a debate in Jakarta on Jan. 15. The three participating debaters from the University of Indonesia clearly attested to the country's dying economy. The topic of discussion pertained to The Death of Economics, a book written by Prof. Dr. Paul Ormerod of the UK).

Indeed economics together with economic policy is dead today in Indonesia as may be seen by the complete paralysis of Bank Indonesia. The central bank seems to run its affairs aimlessly: It does not know how to handle the money supply, the interest rate and the exchange rate, and it does not exercise its management of the banking and financial system.

The points I would like to submit are as follows:

All along, our people have placed the IMF on a high pedestal since it is thought to have all the top experts in monetary and foreign exchange affairs. Our actual experience so far has shown that the IMF office in Jakarta has been acting like it has had its eyes closed, not being able to see BI's predicament of being only a lame duck -- a phenomenon too obvious to escape anybody's observation. There is no such thing as a contagious Asian monetary flu. The Indonesian monetary crisis stands on its own and was made by Bank Indonesia.

Why offer such a huge standby loan, if our monetary authorities would not possibly be able to utilize it. Surely, you are not going to apply a "beg-thy-neighbor" policy to our country, are you? Granting, therefore, that the IMF is genuinely interested in helping Indonesia out of its quagmire, it should study the situation in depth in order to formulate the necessary approach to be used by our monetary authorities to bring us back to the road to recovery.

HMT OPPUSUNGGU

Jakarta