Open letter to Mr. Camdessus

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